UK retail: Good data, grim prognosis
Thousands of retail businesses in the U.K.'s town centers are on the brink of collapse, a veteran retail analyst is set to warn the U.K. government this week, just as data appears to confirm a rebound in consumer confidence and sales.
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"As a check up on the health of the high street, the prognosis is not good," Bill Grimsey, a co-author of the report and former chief executive of DIY chain Wickes and food store Iceland, said in a report on the U.K. retail sector due to be presented on Wednesday.
"Over 20,000 businesses are at risk and we can expect more and more business failures. There are around 40,000 empty shops in the UK, and this has remained constant over the past three years," Grimsey said.
The analysis, carried out by financial risk management group Company Watch, showed that nearly half of the U.K.'s retailers were under "horrible stress financially" - a factor more common in smaller retailers. Grimsey urged the government to reduce business rates, increase bank lending to small retailers and the introduce a minister for the retail sector in order to support the industry.
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However, his comments appear to jar with other data released on Monday in which U.K. retailers reported that like-for like high street sales in August were up 3.5 percent - the highest increase since February.
The uptick was attributed to a fast-recovering housing sector and well-performing department stores in which homeware sales increased 20.2 percent year on year.
The data prompted the national head of Retail and Wholesale at BDO, which carried out the research, to say the overall outlook for the U.K. high street was positive. "This year [the feel-good factor] is being prompted by the change in tone in the media and consumers being less fearful of imminent restructurings and redundancy. There is no doubt confidence is returning slowly," Don Williams said.
His comments appear to chime with data released last week that increased hopes the U.K. economy was improving, helped along by rising consumer and business confidence was rising, along with U.K. house prices. Adding to the optimism was an expansion in manufacturing activity in August, data showed on Monday.
Despite the apparent confidence boost, however, other analysts said that structural changes in the retail sector, such as the move to online retail, would not be reversed and the high street would continue to decline.
"There certainly seem to be some mixed messages emanating from the retail sector at the moment," Bryan Roberts, director of Retail Insights at Kantar Retail, told CNBC. "While the renewed debate created by the Grimsey review…is welcome, without some tangible actions from central government, local government and retailers themselves, such debate might become akin to rearranging the deckchairs on the Titanic."
The head of retail consultancy at property service firm CBRE said that government attempts to help the high street were like a "band aid" on a large problem and that more shops would indeed succumb to closure.
"It's true that sales are up but the structural changes in the retail market mean that we will see more and more shops closing as online retail takes over more of the retail market," Jonathan De Mello told CNBC on Monday.
Physical shops also wanted to exploit better locations in purpose-built shopping malls rather than "badly configured and poorly structured" high streets.
Other research appeared to back Grimsey's report. Research published on Sunday by the Local Data Company (LDC) and the British Independent Retailers Association (Bira)warned that more than 320 independent shops will close every week in the U.K's 500 biggest towns during this year alone.
"Retailers now want to be in less [shopping] centers and the best centers," De Mello remarked. "So while we're seeing bigger retail locations like Birmingham improving and seeing more injections of capital, smaller towns will suffer further as shops don't want to be there anymore."
-By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt