Independents feeling the squeeze, warns British Retail Consortium

The retail sector is facing the loss of up to 900,000 jobs and the closure of thousands of shops in the next decade, warns a new report from the British Retail Consortium. And independent shops will be more at risk than larger corporate ones thanks to rising costs due to the National Living Wage and the new apprenticeship levy.

There will also be store closures thanks to customers flocking to online-shopping. Approximately 15 percent of retail sales are conducted online, and there are approximately 40,000 fewer shops today than there were in 2006. The net result of all these changes is that profitability for the industry has declined, says the BRC report. Across the industry as a whole net proftability has fallen from 6-8 percent of sales pre-2007 to 3-5 per cent today.

The report adds: "All retailers are being impacted in some way by the ongoing evolution of the industry. However, smaller retailers generally have fewer ways in which to respond and are therefore likely to be more impacted than larger retailers.

"Larger retailers have more options than smaller retailers to drive producivity improvements needed to sustain employment at higher rates of pay. Smaller retailers are more restricted to cutting posts or reducing differential rates between junior and more senior roles and have less scope for step change investment in areas such as logistics, technology or training."

The BRC report said he number of independents, which account for 65 per cent of outlets nationally, have gone into decline for the first time since 2012. BIRA and Local Data Company analysis shows that the number of closures of independents outstripped new openings in the first half of 2015.

Looking on the bright side, the report stresses that "retailers are adaptable by nature."

It adds: "Change is a constant and the retail industry in the UK has evolved more effectively than in most other advanced economies, with the result that the UK is one of the most competive markets in the world and a leader in ecommerce. That rate of change is now set to quicken. 

The retail sector employs three million people – a number that could fall by nearly a third in less than a decade, says the BRC. Of the 270,000 shops trading today, up to 74,000 could shut.

The closures would be worse away from the south east of England, with nearly 30 percent of closures happening in Wales and the north of England.

In April, the National Living Wage will come into force at a rate of £7.20 an hour for the over-25s, replacing the present minimum wage of £6.70 per hour. The BRC report also says that retailers are facing a heavy tax burden and it recommends that business rates should be reformed.

The latest report is the first of three to be published by the British Retail Consortium – the trade body represents all forms of retailers from small, independently owned stores, to big department stores. It represents 80 percent of retail trade in the UK by turnover.