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Retail stores in the UK prepare for bleak year amid rising costs

On top of retailers’ woes, an ongoing cost of living crisis has seen many shoppers become more cautious about their spending habits.

Retail stores in the UK prepare for bleak year amid rising costs

Shuttered shopfronts have become a familiar sight across the United Kingdom.

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BRISTOL: Close to two years after opening a shop selling historic collectibles, James Steel has found success in attracting locals to patronise it.

Despite this, it has become more difficult for him to justify the work involved in sustaining the business - located in the town of Nailsea, about 20km away from bustling Bristol in southwest England.

“Everything has become a bit more difficult, when (it comes to) the rise in corporation tax, the energy prices over the last few years, minimum wage (and) the cost of items,” he told CNA.

“Everything has become more expensive, and it becomes more and more of a challenge each year to balance the books.”

SHOPPERS CAUTIOUS TO SPEND

On top of retailers’ woes, an ongoing cost of living crisis has seen many shoppers become more cautious about their spending habits.

With a pessimistic outlook about when the wider economy will improve, shuttered shopfronts have become a familiar sight across the United Kingdom.

The Centre For Retail Research said about 13,500 shops in the United Kingdom closed last year, marking a 28 per cent increase from the previous year.

Changes to national insurance contributions and an increased minimum wage were announced in the last government budget. Such changes have burdened the retail sector with an additional cost of US$8.5 billion, according to the British Retail Consortium.

“Retail operates on tight margins. It can't simply absorb those costs, so that will lead to higher prices, some job losses, unfortunately - and shop closures,” said the trade association’s communications executive Guy Leman.

However, one silver lining is a government proposal to reform business rates, he noted. 

These are levied on most non-domestic properties like shops, offices and pubs. The rates are based on how much it would cost to rent a property during a particular period.

The government has suggested a 40 per cent reduction in business rates for retail, hospitality, and leisure businesses until 2026, up to a maximum of 110,000 pounds (US$133,000) per business. 

“This has been a system which has long burdened the industry (and) limited investment in stores and high streets. We need to ensure that that reform leaves no shop paying more. And ultimately, the whole industry is better off as a result of that reform,” added Leman. 

BLEAK OUTLOOK FOR RETAIL SALES

After a disappointing 2024, hopes were pinned on the so-called Golden Quarter - the three months of the year that include Black Friday sales and the build up to Christmas.

However, latest figures showed the value of sales rose by less than half a per cent.

Industry players have warned that things will get worse in 2025.

E-commerce, on the other hand, is still going strong, and accounts for over a quarter of all retail sales in the UK. 

Among the perks that draw customers online is the option of free delivery, which is in contrast with the money they would have to fork out for parking and public transport to do their shopping in person.

Retail accounts for almost 10 per cent of all jobs in the UK but job losses in the sector have risen steadily over the past four years.

For people like store owner Steel, time could be running out.

“We have a three-year lease, but at the end of that lease, we are already planning to go online. The main reason is that the cost of having a brick-and-mortar shop is too great, it’s just too difficult,” he said. 

Source: CNA/ja(lt)
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