'Another wave' of retail failures predicted if business rates relief ends
“High streets are starting to look like a bare-knuckle fighter that’s had half his teeth knocked out,” says Richard Pennycook.
It’s hard to disagree. The trend of online spending was well-established before Covid-19 but lockdown has accelerated it.
Today, Asos, an online-only retailer that is inclined to stay that way, sealed a deal to buy the Topshop, Topman and Miss Selfridge brands from the administrator. It didn’t want the shops.
“It’s depressing, but I’m not surprised,” says Pennycook, who used to run the Co-op Group and is the former chair of The Hut Group and The British Retail Consortium.
“The difficulty, I think, is that once a centre loses its heart, once every other shop is boarded up then it’s not the sort of place that people want to go to.
"Of course, that means that for the businesses that are still there, trying to make a living, they haven’t got enough footfall to be viable. It actually becomes a vicious spiral."Altus Group calculates that Debenhams and Arcadia occupied 1.4 square million metres of retail space - the equivalent of 194 Premier League football pitches.
Former Co-op Group CEO Richard Pennycook says business rates must be extended to avoid more retail casualties
Pennycook believes this space will be very hard to fill and that, when lockdown lifts, we will find our city centres transformed for the worse.
“In previous recessions or shake-outs, if a retailer did cease trading then somebody else would quickly come in. It was a vibrant environment. But, of course, now so much trade is online there won’t be retailers taking that space,” he told ITV News.
And he predicts that the pock-marks on the high streets will get bigger if the business rates holiday for retailers isn’t extended.
Business rates is a tax on property. Last March, as we headed into the first lockdown, the chancellor gave retailers a 12-month business rates “holiday”, saving them around £8 billion.
Retailers are due to starting paying the tax again in April, but many claim they can’t afford to because their shops are closed once again
“If we don’t see the lifeline go beyond March 31 then we will see another wave of retailers that are unable to survive on the high street,” Pennycook says.
In 2016, The British Retail Consortium talked of 900,000 retail jobs disappearing by 2025 as spending moved online.
Pennycook believes that the reality is that will happen more quickly now because of the pandemic. He argues the job losses will occur “right now and in the year ahead.”
Successive governments have promised to review business rates. Pennycook sits on the Retail Sector Council, which advises government. He argues the tax still offers online retailers an unfair advantage.
“[The government] is going to have to level the playing field,” Pennycook says.
“We’ve said in order to do that they should think about changing either Corporation Tax or VAT.”