With inflation reaching a five-and-a-half year high in October 17, and Bank of England Governor Mark Carney communicating that it is expected to peak early this year, the weakened pound and resulting rising costs have put pressure on the UK high street and worked their way into consumer back pockets with increasing shop prices. Simultaneously, wage growth stalled, with many expecting imminent signs of a recession, as spending power declines.
Interestingly however, record employment levels and sustained spending habits took much of the bite out of the expected doom and gloom, with overall spend staying consistent. The most interesting change is not in spend value, but in spend distribution, with many consumers changing their habits and pursuing entertainment pursuits, or purchasing online, leaving high street vendors with less of a market share.
It is expected that the combination of rising wage bills, business rates and structural challenges will combine to underpin a significant shift in the UK high street, with many retailers opting to focus online and shut some or all on-the-ground outlets. The number of physical shops across the UK is expected to fall by 22%, with a further 164 major or medium-sized companies expected to fall into administration compared with 42 retailers who failed in 2016. Both these stats come from the Centre for Retail Research.
This telegraph article paints an interesting picture of the future of the British High Street, evaluating retail performance from Toys ‘R’ Us, Sainsburys, Marks & Spencer’s and Waitrose among others.
Suppliers to high street and online retailers are being encouraged to properly evaluate the appropriate risk for each of their clients and extend appropriate credit limits to these retailers. To find out more about credit management and credit insurance, and help reduce the risk for your business, speak to our team on 01275 817320.