UK retail is in crisis with many high street brands struggling for survival. Increasing numbers are turning to company voluntary arrangements (CVAs) in a bid to restructure their store rental obligations and save their businesses. But has the pendulum swung too far in favour of retailers? Here Clifford Chance experts explore what lies ahead for landlords, their lenders and the future of retail.
The UK retail sector has hit a perfect storm – almost 2,500 shops, banks and chain restaurants disappeared from the top 500 high streets in 2018, and major retailers such as Marks & Spencer have announced store closures and an end to expansion plans. Much of that retail and banking business has shifted online. Internet shopping now accounts for over 20 per cent of all retail sales and grew at ten times the rate of store sales during 2018. This has led to deep discounting and reduced footfall.
Partner Iain White says: “This, coupled with increases in the minimum wage, upward only rental reviews, rising business rates, unfavourable exchange rates, and uncertainty about Brexit and its impact on tariffs, movement of goods and consumer spending, suggests that weaker retailers are going to struggle to survive at least in their current state – and I think ‘in their current state’ is quite an important caveat here.
