RETAIL: Down but not out

06/03/2009

Although the retail sector decline eased slightly at the start of 2009, as UK consumers ploughed into the January sales, the respite proved short lived.

Indeed, business body the CBI reports a poor start to the year for the majority of UK retailers, with 63 per cent admitting that year-on-year sales volumes were down in the first half of January and only 16 per cent seeing an improvement.

Confidence remains battered, with a balance of 52 per cent of the CBI’s 20,000 surveyed firms expecting sales to decline in February, the weakest forecast since the survey began in July 1983.

‘Most of the sector continues to struggle as the recession bites more deeply, and February will be tough,’ laments CBI chief economic adviser Ian McCafferty. ‘It is possible that pre-Christmas discounting by some retailers numbed many shoppers to the allure of the new year sales.’

On the positive side, those retailers that do survive should have the pick of the choicest high street sites, given the raft of failures in the sector. According to research into the administration announcements of 22 retailers from PricewaterhouseCoopers, the accounting giant posits that if just ten per cent of national retailers get into financial difficulty in 2009 then an additional 4,400 stores could come onto the market, causing rents to plummet.

PwC corporate restructuring partner Barry Gilbertson says, ‘When all this new retail space is added to our predicted store closures coming also onto the market, the downward pressure on retail rental levels increases even further. For tenants, this pressure should mean cheaper rents, but for landlords life will be even tougher, as some tenants go out of business and other tenants push hard for lower or deferred rental payments’.