COVID-19 And Measures To Protect The High-Street


The UK high street has been on a constant decline for the last few years. An age of crippling austerity measures, rising rent and the transition to online shopping has seen the closure of many independent retailers and big name brands.

The number of shoppers visiting outlets has dropped by over 10% in the last seven years. Now, the high street is enduring further strain as COVID-19 completely reshapes the way that people shop.

Businesses have subsequently been pressing the government to take urgent action to relieve them from added pressure. Business Secretary Alok Sharma has responded with further measures, temporarily banning landlords from aggressive debt recovery actions.

While some have said this will provide businesses with some “breathing space,” others fear this could be the end of the high street as we know it.

High streets hit hard

In March, high street retailers were hit with their worst month on record. According to BDO high street sales tracker, sales plummeted by 17.9%. Perhaps more concerning is that a poll by the British Chamber of Commerce found that 6 in 10 companies have less than 3 months of cash left.

Many high street businesses have already fallen into administration.Those hit the worst were suffering prior to the government sanctioned lockdown. Some of these losses include Debenhams, Carluccios, Laura Ashley, Chiquitos and Carphone Warehouse.

Now, those stores which have had to close their doors are refusing to pay rent due to financial hardship. This includes JD Sports which is refusing rent payments for its 390 UK stores. Other high street companies have faced criticism for withholding rent. Boots, which is classified as an essential retailer that can still trade, will benefit from the government’s business package which scraps business rates and is still delaying rent payments.

Meanwhile, Matalan which has closed 232 stores due to COVID-19, was issued a winding up order. This is typically used as a ‘last resort’ by creditors, and forces a company into liquidation. It was reported by The Daily Telegraph that this debt has since been settled.

Further debates have opened up concerning who should receive financial assistance in the wake of COVID-19. Back in March, Nile Pratley, Financial Editor for The Guardian argued that companies that were already ‘teetering on the brink” such as Intu, should not get access to government support packages. Now a few weeks on, according to The Times city analysts have attributed a target price of 0p to shares of Intu Properties.

Likewise, companies that don’t use e-commerce have been severely hit. Primark for example, which had been significantly outperforming its competitors has seen its monthly sales shrink from £650 million to nothing. As a result it is withholding £33 million which covers rent for two thirds of its 189 stores for the next 3 months.

Measures to protect businesses

On 23 April, Business Secretary Alok Sharma announced the introduction of temporary measures, intended to “safeguard” businesses against “aggressive rent collection”.

As a result, the government has issued a temporary ban on both statutory demands and winding up orders if businesses are unable to pay their rent. To further protect businesses from collapse during the crisis, additional measures, to be included within the Corporate Insolvency and Governance Bill, prevent landlords from issuing Commercial Rent Arrears Recovery (CRAR). However, if landlords are owed more than 90 days of rent, this is still permitted.

Meanwhile, both landlords and investors have been asked to work constructively and compassionately with tenants who find themselves unable to pay rent.

These new measures accompany the government’s order of a 3-month moratorium on landlords with commercial leases evicting their tenants for late payments on rent. They have been welcomed by the business community. Kate Nicholls, Chief Executive of UK Hospitality has called the new measures both “helpful” and “pragmatic,” while Helen Dickinson OBE, Chief Executive of the British Retail Consortium has said they will give retailers “vital relief”.

Will the high street survive COVID-19?

Understandably, despite these measures many fear for the future of the high street, and question if it will be able to bounce back. Even prior to the crisis, there were serious calls for it to adapt to new shopping habits. Now, many are worried it’s decline has been significantly accelerated by the virus.

Speaking to The Telegraph about his concerns surrounding the impact of lockdown, Andrew Goodacre, CEO of the British Independent Retailers Association (BIRA) said: “Internet sales were [20%] of all sales and climbing. I suspect at the moment they are probably nearer [80%], and when we get through this crisis I very much doubt they’ll drop below 60. That will be a real hammer blow to the high street and independent retailers”.

Additionally, despite receiving financial support and a moratorium on eviction, it may be difficult for businesses to emerge and prosper when the lockdown is lifted. Potential reasons for this vary from an inability to purchase sufficient stock due to poor credit to shopper’s reluctance to enter enclosed spaces.

Ultimately, when lockdown measures are lifted, if shoppers want to help maintain their high street, they must be more conscious about the way they choose to consume. Instead of opting for the convenience and cheapness of online shopping, they must instead support both independent retailers and chains on their high street to prevent them disappearing completely, and with them millions of jobs.

Article Created By Madaline Dunn