Q&A: What next for the British high street?

Retailers gave a cautious welcome to news that a “dazzling” week before Christmas saw sales rise by 2.2 per cent compared with the last year. At the same time, professional service firm, Deloitte, said the total number of retailers in England and Wales falling into administration increased by 11 per cent to 183 last year.

Channel 4 News takes advice from Maureen Hinton, lead analyst at Verdict Research, and other researchers to find out where the high street is likely to stand.

What will the British high street look like in 12 months time?

Retail analysts suggest the slow death of the traditional British high street will continue this year. The high street we are likely to see next year will look rather different to the pre-recession days as more mid-market non-food shops face tough times.

The leisure and entertainment sector – restaurants and cafes, books and music shops – will continue to see casualties as more and more people choose to stay in to eat.

This could also be the year in which the value end of the clothing market begins to suffer, as they are dependent on high sales volumes.

Meanwhile, the main players – larger department stores and supermarkets – will continue to hold their ground as they offer a range of goods from one tried and trusted source. We are already seeing some overseas investors begin to make moves to take over floundering UK businesses, such as Kuwaiti retail franchise operator, Alshaya, which says it plans to invest £100 million in Britain over the next two years through its acquisition of lingerie firm, La Senza. This trend could continue, experts say.

Why has this happened to some shops, and not to others?

Retailers which fall into administration have usually done so because they have not had the cash flow to cover their costs and debts. Before, debt was cheap and the retail environment plentiful, so weaker operators survived. But support from banks was withdrawn, and trading failed to produce enough cash to service debts, businesses on the edge were driven to the wall.

Expenditure is still predicted to grow by around 1.2 per cent – the third lowest rate in more than 40 years. Verdict Research

Stores such as World of Sofas suffer because they are dependent on the housing market and on consumer confidence with an ability to spend on big ticket items.

Meanwhile, specialist stores, such as Oddbins, have suffered because they depend on one category to survive.

Are there any shops which will do well over the coming year?

While sales are not expected to soar over the next year, expenditure is still predicted to grow by around 1.2 per cent – the third lowest rate in more than 40 years.

Food will be the driver of growth during the recession, but it will win at another sector’s loss. As more people choose to dine in, supermarkets will pick up spend that would have gone to restaurants and bars.

Perhaps surprisingly, health and beauty is also expected to remain resilient as consumers view it as a necessity and a way of treating themselves cheaply.

Large department stores are unlikely to fare as badly, as they offer such a wide range of goods, but even they may consider shrinking the number of stores they run over the next year to try and minimise leaky profit margins.

How might the picture vary regionally?

Specifically over the next year, it is hoped the Olympics will help London and South East retain a certain amount of buoyancy in retail sales.

Tourism is major driver of retail growth, so again, London and the South East are expected to fare better than other areas.

Regions dependent on public sector employment are not expected to do as well, so Wales and the North East are likely to see some of the biggest high street casualties. However large northern cities, such as Manchester, are likely to retain their positions thanks to large numbers of foreign students and tourists visiting their department stores.

Is there anything retailers can do to protect themselves from becoming casualties of the recession?

Analysts say that factors such as customer service and the quality of product will define the winners over the next year. Things like knowing their customers well and presenting them with products they will want to buy, as well as overall high standards, will help to retain customers who will be faced with making choices on limited budgets. As customers are faced with rising inflation, less disposable income, and feed into the national economic mood of reigning in, retailers with more risky outlooks can try and ensure that when shoppers do decide to spend, they decide to spend there.

Factors such as customer service and the quality of product will define the winners over the next year. Maureen Hinton

Some analysts have also said that a major spending group – the over-65s – have been ignored by retailers, but that they shouldn’t be, given they are going to account for 18 percent of the population in 2015. Retailers could begin to target the older consumer more directly, as they will continue working, whereas the youth, 16 to 24-year-old sector may see their disposable income diminish with rising education costs and fear over their employment prospects.

What can the government do about it?

Retailers – particularly small and medium enterprises – say that red tape is a major barrier to running a successful high street business. Any reduction in business rates would also help.

While banks are already being encouraged to lend to small businesses, further promotion wouldn’t go amiss as banks remain fearful of taking risks with new and start-up businesses.

Building up consumer confidence can make major strides in protecting the high street, although most people have already accepted it is going to be a tough year.

Mary Portas’ review into high streets also emphasised that there are important geographic differences which require localised solutions, so local authorities may need to address their business priorities. On a wider scale, more targeted employment schemes and projects would also have an obvious impact, giving consumers more spending power while also boosting consumer confidence.

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