Scottish high streets weathering most testing retail and leisure climate in five years - PwC

In the first half of 2018 there were 58 new store openings in Scotland’s main cities and towns, but 107 closures led to a net change of -49, according to PwC research compiled by the Local Data Company (LDC) released today. The first half of 2017 saw a net change of -42.

However the rate of net closures in Scotland is slightly better than the overall picture across Great Britain. In Great Britain, a net 1,123 stores disappeared from the top 500 high streets in the first half of the year. The research found 1,569 shops opened, compared to 2,692 closures. (H1 2017 net loss: -222 stores).

In Scotland, nine towns and cities are evaluated in the study. Aberdeen fared worst in relative terms, with -4.24 per cent net closures. In the nation’s largest two cities there were also further net closures with Edinburgh seeing a net reduction of 13 stores and Glasgow 11, to 992 and 887 stores respectively. The only areas to see an increase in store numbers were Ayr and Leith, in Edinburgh, which both increased by one net store.

The data also reveal the extent of the migration from high streets to retail parks. Over the period measured 67 high street stores closed and 40 stores in shopping centres, while the number of stores in retail parks remained static (see table 2).

The analysis highlights changes in Scots’ consumer habits with men’s and women’s fashion shops among the most affected as shoppers move online. Kitchen planning shops, opticians, shoe shops and banks were other categories which saw notable net closures.

Mark Addley, head of restructuring for PwC in Scotland, said: “Our analysis reveals a retail map which is continuing to change beyond recognition from a generation ago. The convenience of online shopping is making its mark on the high street, and we expect this will lead to retailers having to re-evaluate the purpose of their bricks and mortar operations.

“The number of high-profile retail casualties in 2018 has made headline news, while the volume of distressed businesses this year has led to a spike in company voluntary arrangements (CVAs). While these measures can help alleviate short term distress they are not a viable long-term solution unless there is a fundamental change to the business model.

“The intensity of the current retail climate which is being felt across Scotland’s towns and cities highlights that restructuring and new investment are required, but so are new ways of thinking.

“Retailers of all sizes will be hoping for a strong festive trading period, but we must bear in mind that the peak time period for new CVA announcements is first quarter of the New Year, so we should brace for more high street closures in the coming months.”

Data reveals that across multiple retailers in 500 town centres, the impact of CVAs and retail administrations has introduced new categories to the fallers list. Electrical goods and Italian restaurants are particularly prominent. This is due to the demise of Maplin (more than 50 of its locations were among the top 500 locations assessed in this research), and CVAs announced by Jamie’s Italian and Prezzo, in addition to general closures by Strada.

In addition to the closures in the retail and leisure sectors, many traditionally store-based service businesses, such as banks, estate agents, recruitment agencies and travel agents, have continued to move online, albeit their rate of closure has slowed as fewer of these types of businesses remain on the high street.

Lisa Hooker, consumer markets leader at PwC, said: “Our latest research highlights the challenges facing the retail and leisure sectors on Britain’s high streets. The continued rate of store closures reflects the new reality of that many of us prefer to shop online and increasingly eat, drink and entertain at home. The high street is adapting to an overcapacity in retail and leisure space resulting from these channel shifts.

“Openings simply aren’t replacing the closures at a fast enough rate. Specifically, the openings across ‘experiential’ chains, such as ice cream parlours, beauty salons and vape shops, haven’t been enough to offset closures in the more traditional categories.

“Looking ahead, the turmoil facing the sector is unlikely to abate. Store closures in H2 due to administrations and CVAs will further intensify the situation.

“The British high street is in urgent need of new ways of thinking and new forms of retail. Encouraging this should be a priority, and it remains to be seen if recent packages of support for the high street and reductions in business rates for smaller retailers will be sufficient to stimulate this.”

The PwC/LDC analysis of the 66,961 outlets across Great Britain found that the overall volume of activity (number of openings minus closures) plummeted from 6,523 in H1 2013 to 4,261 in H1 2018.

Lucy Stainton, senior relationship manager (Retail) The Local Data Company, said: “The performance of the physical UK retail landscape has well and truly passed an inflexion point. Whilst there are still many examples of sectors and brands which remain resilient to market challenges, it would be remiss not to acknowledge the increase in store closures, seen especially in the first half of 2018 when the gap between openings and closures has widened significantly.

“Retailers and leisure operators alike are frantically trying to adjust their business models and concepts to meet evolving consumer habits. Arguably in part these latest figures reflect both; businesses which have struggled to meet consumer demand, but also conversely those operators who are actively managing and reducing their portfolios to ensure their estate remains fit for purpose.”

Reacting to the PwC/LDC report on Scottish retail, David Lonsdale, director of the Scottish Retail Consortium, said: “These figures demonstrate just how challenging and volatile times are just now for Scotland’s retail industry, as shown by several casualties of late on our high streets. Retailers are contending with profound changes in shopping habits, squeezed consumers and spiralling costs. Responding positively to structural change requires substantial outlays on digital infrastructure, a higher skilled workforce and revamped logistics capability. This is hugely challenging at a time when retailers are forking out more for public policy induced costs such as the apprenticeship levy, business rates, and the large firms’ business rates surcharge.

“These figures should serve as a wake-up call to policy makers, with a far greater focus brought to bear on reducing the costs of doing business.”

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