Opinion

COVID-19: Can the UK’s
retail sector survive or adapt?

Coronavirus resource hub

COVID-19: Can the UK’s retail sector survive or adapt?

Published: 20th April 2020
Area: Real Estate & Planning
Author(s): Julian Joseph ,

It’s clear to see that the UK’s retail sector is facing a host of challenges at the moment. Increasing overhead costs and a desperate need to modernise have already put retail in a dangerous position, and the addition of COVID-19 has piled the pressure on further. During these difficult times, the High Street must respond quickly.

Survival mode

A number of high street brands such as Carluccios, Warehouse and Oasis have already announced administration as a means of survival whilst they restructure. The news of Debenhams entering into its second administration within a year was not a surprise. Creditor pressure and COVID-19 was a combination that couldn’t be fought without urgent protective action.

However, these companies are not the only well-known names to make a drastic decision in order to survive. New Look have announced plans to suspend payments to suppliers for existing stock “indefinitely”, telling them in a letter that the items could be collected by their suppliers.  Both Primark and Arcadia have cancelled large orders from their suppliers. Asda have announced that they are reducing payments to their clothing suppliers. Currently, getting access to credit lines is the main obstacle for many businesses, and coronavirus means that the cash flow situation isn’t going to improve any time soon. However, the Government has recognised the imminent threat of insolvencies, stating that it plans to facilitate cash injections and other financial support for businesses.

Time to get innovative

Retailers may have had to physically shut up shop, but that doesn’t mean they can’t still raise awareness of their brand. Net-A-Porter, a luxury fashion e-commerce company, have taken advantage of the popularity of Nintendo’s Animal Crossing: New Horizons, by working with Chinese fashion designers to create avatar skins for characters. As well as being available to download in game, the clothes are also available to purchase in real life.

Other companies are increasing their online presence. Many companies are adapting their businesses. For example, food producers previously selling to the hospitality sector are gearing up to provide home deliveries. Some innovative new businesses are being set up, for example, acting a middleman between garden centres and households.

Be practical

Innovation is a key part of making it through these complex times, but practical issues, such as managing cash flow relating to property, are also a priority.

For many smaller companies, business rates holidays and loans aren’t going to be enough for them to weather the storm. In fact, a more pressing concern will be rent payments, with rent holidays, suspensions, reductions or more manageable payment schedules needed. Further information regarding negotiating commercial rent agreements can be found at our coronavirus hub.

While retailers wait for the promised funds and other payment mechanisms to materialise, they must begin innovating, communicating, and documenting the damage that COVID-19 has done to their business. E-commerce may offer some relief, but this will only help so much for those without access to credit lines.

For more guidance, contact a local member of our real estate team.

Shakespeare Martineau has launched a free legal helpline offering bespoke guidance on a range of subjects from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

General advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

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