Hundreds of high street retailers face the threat of closure as they struggle to pay big rent bills due at the end of one of the worst winter trading seasons in living memory.
Demands for the rent, paid three months in advance and falling due today, could push many hard-pressed stores over the edge, industry analysts warned yesterday.
The warning came after new research revealed that the proportion of empty shops in town centres is the highest in the four years for which records have been collected. A series of grim developments last week, including a fall in retail sales and warnings that retailers would come under further pressure from internet trade, underlined the crisis besetting UK shopping areas. Retail sales volumes fell 0.8 per cent in February, and the £24.6bn spent in the retail sector last month was only slightly up on the £24.4bn spent in January.
The Government, meanwhile, is preparing to respond to a blueprint for saving the high street developed last autumn by the retail troubleshooter Mary Portas.
Research by The Independent on Sunday shows that thousands more shops will disappear from high streets in the coming months as retailers respond to the economics by moving to out-of-town shopping centres, concentrating on internet sales – or going out of business altogether. Several high street names, including Thorntons, JJB Sports, Clinton Cards and Thomas Cook, have already experienced severe financial difficulties.
Shop rents, which now average more than £110 per square foot across the UK – rising to nearly £1,000 per square foot in central London – have become one of the most troubling commitments faced by retailers, particularly when they are tied to long leases. Many of Britain's biggest retailers, among the 88 per cent of the sector with quarterly rental commitments, are now demanding a switch to monthly bills in a desperate attempt to keep their heads above water. The pressure of quarterly rent payments helped to bring huge chains such as Woolworths, Barratts and Habitat to their knees.
The computer game chain Game Group, which last week announced that it intended to appoint an administrator, putting some 600 UK shops at risk, was facing a huge quarterly rent demand, believed to be in the region of £15m.
"Given recent high-profile retail casualties either side of Christmas, there will be a considerable amount of attention on 2012's first rental quarter day," said Jonathan De Mello, head of retail consultancy at CBRE, a leading commercial property adviser. "Given that many retailers did not have a particularly good Christmas, it is quite possible that certain retailers could go into a company voluntary arrangement this quarter, and I would not be surprised if this included one or two big names."
Neil Smyth, a partner at the law firm Taylor Wessing, said the combination of muted Christmas trading and looming rent demands had left many retailers in a precarious position. He said: "With the potential of a Christmas boost to sales now gone, the first quarter of the year is always a difficult time for retailers. This week's payment deadline is a crucial time for many on the high street who are struggling to pay landlords, suppliers and their banks at the same time.
"I expect further retail insolvencies to occur over the next few days and weeks ahead – timely action will be crucial for retailers who want to preserve the legacy of their business in these troubled economic times."
A monthly update from the Local Data Company last week revealed that a wave of post-Christmas closures had pushed the number of shop vacancies to 14.6 per cent last week – the highest rate in four years.
But The IoS has established that almost 3,000 more closures are already in the pipeline, as major retailers prepare to downsize or move to out-oftown centres. The closure plans, by giants including Thomas Cook, Clinton Cards, Mothercare and Comet, could cost some 3,286 outlets and threaten almost 30,000 jobs.
A slew of companies was forced to close outlets in the early part of last year as the economic difficulties of the post-Christmas period dragged into the summer. The list included the fashion brand Henleys, the menswear chain Officers Club, the off-licence Oddbins and Focus DIY. But Mr De Mello fears 2012 is already shaping up to be the worst year since 2008, when the jobs of thousands of staff from Woolworths, Zavvi and MFI were among 75,000 lost from the high street.
He said: "Since then, on average, 30 multiple retailers have failed per annum, with an average of 20,000 jobs lost and a significant rise in shop vacancy.
"We predict that more than 40,000 jobs could be lost in retail this year. Given retail failures that have already happened, even this could prove to be a fairly conservative prediction."
The Government is expected to publish its response to the Portas review into the state of the high street as early as this week. Ms Portas, who was asked to conduct an independent review, presented her findings last December. The finished report set out 28 recommendations, including support for "town centre first" development and requiring "exceptional sign-off" from ministers for all new out-of-town schemes.
Brian Brady, Jonathan Owen and Laura Chesters
Companies under the cosh
Game group Suspended trading in its shares last week after major suppliers withdrew support. Later confirmed it would appoint an administrator. Game, with debts of £100m, has been considering closing half of its 610 stores.
Mothercare Shutting 110 of its 373 shops and left 158 head-office staff facing redundancy. A profits warning last autumn was followed by a £4.4m half-year pre-tax loss. UK comparable sales over Christmas and New Year were down 3 per cent.
Thomas Cook Made a £151.7m pre-tax loss in the last three months of 2011, compared with a £99.3m loss a year earlier. Closing 200 of its 1,300 UK travel agencies, and slashing staff holiday discounts.
Clinton Cards Put its Birthdays chain, with 141 shops, up for sale this month. The discount card company had not made a profit since Clinton bought it for £50m in 2004. It made a loss of £8.6m in 2010/11.
HMV Suffering from online competitors and the decline in the DVD market, it is set to close 60 stores. It scored only five out of 100 in an assessment of the firm's financial heath by analysts at Company Watch earlier this year.
Comet Considering selling off at least 60 shops and will meet landlords this week in an attempt to reduce its rent bill. Bought for £2 (with a £50m lump sum thrown in by its previous owners, Kesa Electricals) by the private equity firm OpCapita last month. It has since announced that at least 450 jobs will go.
First get yourself a plan...
The worsening plight of high streets has sparked a series of rescue plans in recent years.
The date 2008:
The plan The Conservatives said councils should be encouraged to improve their own town centres, including tackling crime – and prevent out-of-town shopping developments damaging high streets. Also recommended a review of retail rates and rents.
The result Ignored by ministers.
The date 2009:
The plan The British Retail Consortium published 20 recommendations, including combating anti-social behaviour, better parking and public transport, and a mix of independent shops and big-name retailers.
The result BRC involved in government discussions, but little changed.
The date July 2011:
The plan Labour called for new planning tests to create a "level playing field" for large and small traders, and a temporary cut in VAT from 20 to 17.5 per cent, to help struggling retailers.
The result Labour's turn to be ignored.
The date December 2011:
The plan Independent review by retail troubleshooter Mary Portas came up with 28 recommendations, from planning incentives and business rate concessions to a new "National Market Day". She also proposed "a presumption in favour of town-centre development".
The result Government's response promised by the end of next week.
The date 2012:
The plan Local government minister launches a competition to find 12 areas to pilot a strategy for improving England's high streets.
The result Towns such as Letchworth, Ashbourne and Halesworth have entered the running to become a "Portas pilot".Reuse content