Even before the full effect of this deadly virus is known – and that’s still a long while away – it has already made a severe impact on UK’s retail sector, among various others. Shops on struggling high streets and shopping centres may never reopen as retailers are forced into a more rapid retreat by coronavirus, one of Britain’s biggest landlords has warned.
Chief executive of British Land, the FTSE 100 giant behind a £4.8bn retail portfolio covering a vast area from north to south of the UK, Chris Grigg, said the outbreak would act as a “stress test” for retailers facing lengthy closures. Grigg said the mantra for many will be “never let a good crisis go to waste”. He said: “What you will see is that in less good places, retail won’t reopen. People are just going to say, ‘I’m sorry but we’re going because we now know what physical (stores) does for us and what it doesn’t.’”
Grigg’s comments follow forecasts from the Centre for Retail Research that more than 20,000 shops could close this year as Covid-19 accelerates the rise of online shopping. Some 235,000 jobs could be lost. “There aren’t enough retailers, they have got too much space and you can’t really easily transform that,” he added. While offices form the majority of British Land’s £11.7bn portfolio, barely one in 10 of its stores are open due to the lockdown.
The company has suspended its dividend until further notice while it negotiates with tenants over rent deferrals and has temporarily agreed to scrap rents altogether for its smaller occupiers. The spread of coronavirus has made the situation worse for the struggling UK high street stores that had seen a drop in footfall from the start of the year.
Even prior to the impact of the virus, in the first two months of the year, 18,248 retail jobs were lost and 1,211 shops closed according to the Centre for Retail Research. However, shopping centres and retail parks remained popular, in part, because of their covered environment and ease of access.
The world’s second-largest clothes retailer, H&M, has said Covid-19 would accelerate the transformation to online shopping. Sales at the Swedish-based firm almost halved by April and it is talking of “tens of thousands” of lay-offs. Chief executive Helena Helmersson said: “The situation cannot be compared with anything we have ever experienced.” H&M has suspended its dividend, slashed investments, cut working hours for tens of thousands of employees and is in talks over extra credit facilities.
Bosses at Primark owner Associated British Foods (ABF) will take a temporary pay cut as the coronavirus pandemic eats into the retailers’ finances. Salaries of the chief executive and finance director and chief executive of Primark will be halved. ABF said it is “acutely aware that many Primark employees will see their livelihoods affected by Covid-19,” after the retailer shut all of its UK stores. It added: “The board believes these steps are appropriate given full-year earnings will now be much lower than envisaged.”
(The writer is our foreign correspondent based in the UK. He can be reached at firstname.lastname@example.org)