Nearly a fifth of British retailers are planning to cut the number of people they employ in the next three months as the high street continues to suffer from rising costs and a shift to buying online.
The number of people employed in the retail sector, the UK’s biggest employer, has already dropped nearly 3% in the past three months, according to the latest figures from the British Retail Consortium (BRC). Redundancies rose to three times the level this time last year.
Helen Dickinson, the trade body’s chief executive, said: “Retailers are continuing to reduce labour requirements to support a reinvention in how retail and shopping works.”
Retailers remain wary about the future despite a boost to trade for many from the heatwave and England’s unexpected run of success in the World Cup.
The state of UK retail’s ill-health
Toys R Us: 180 stores employing 3,000 staff, collapsed 28 February. Owes £15m in VAT, due by 1 March.
Maplin: 200 electronics and gadget stores, founded 1972, also failed on 28 February.
Warren Evans: bedmaker went into administration earlier in February.
East: fashion brand with nearly 50 outlets folded in January.
Juice Corp: business behind brands including Elizabeth Emanuel and Joe Bloggs went under in January.
Multiyork: furniture chain with 50 stores went into administration in November.
Feather & Black: bedroom furniture and bedding specialist with 25 outlets fell into administration in November.
New Look has debts of more than £1bn and has lost some of its credit insurance cover, which protects suppliers if a retailer goes bust. In the 10 months to Christmas, sales fell 11% and losses hit £123m. The company intends to close 60 stores and change its fashion ranges, but faces a struggle to win back young shoppers.
House of Fraser‘s Chinese owner, Sanpower, had to stump up £25m to see the store through Christmas and its debt is rated as junk. The retailer is attempting to reduce the size of its stores by 30% and has asked landlords to cut rents.
Debenhams, a 178-store chain that is more than 200 years old, is axing one in four of its managers and considering closures to cut costs. It has warned that profits have been hit by lower than expected sales, with profit margins also down as a result of having to cut prices to match rivals.
The Confederation of British Industry (CBI) reported a second strong month in which 32% of retailers said sales were up, while 12% said they were down giving a positive balance of 20%, the second highest reading so far in 2018 for the employer organisation’s monthly distributive trades survey.
Of the 50 retailers who took part, 8% more expected to cut their orders than those that expected to source more in the month ahead as the majority expect sales growth to flatten off in August.
Alpesh Paleja, CBI’s principal economist, said: “While the heatwave has boosted retail sales in recent months, we may be seeing some early signs of a cooling off.
“Indeed, the long-term challenges facing the retail sector are significant. Continually subdued real wage growth means that households are still feeling the pinch, and retailers are still grappling with deeper structural issues, such as digital disruption.”
Retailers also face the rising cost of sourcing goods from abroad following the fall in the value of the pound, alongside a jump in business rates and the legal minimum wage. At the same time household spending remains sluggish, not helped by weak consumer confidence as uncertainty over Brexit continues.
The switch to spending online has spurred traditional high street stalwarts including House of Fraser, New Look, Marks & Spencer and Carpetright to close dozens of shops as they try to pump money into home delivery infrastructure and IT. These closures and the collapse of weaker chains, including Maplin, Poundworld and Toys R Us, have put at least 35,000 high-street jobs at risk.
The loss of jobs is seen as particularly bad news for women. The BRC says 70% of those who work in retail are female.