Scottish shop closures at seven-year low but here’s why retailers face a festive hangover

The Scottish high street may have turned a corner after the rate of store closures fell to the lowest level in seven years, but industry leaders have warned of fresh challenges for retailers amid the crucial Christmas countdown.

PwC’s latest bi-annual report also suggests that the shop closure rate north of the Border remains below the UK average. The in-depth study from the professional services giant uses statistics from location data specialist Green Street and tracks more than 200,000 chain outlets in over 3,500 locations across the UK. It provides a picture of the changing landscape of Britain’s high streets, shopping centres, retail parks and other out-of-town shopping areas.

During the first half of 2024, on average, less than three stores closed each day in Scotland, with two new stores opening - resulting in net closures of less than one store per day, according to the report. Between January 1 and the end of June, 457 stores across Scotland closed their doors, while 335 were opened - resulting in a net loss of 122 shops and outlets belonging to multiples and chains, defined as those with five or more outlets.

The high street has been rocked by the closure of several big chains, including Wilko last year.

With the overall reduction at -0.8 per cent, Scotland’s closures rate for the first half of this year is lower than the rate of 1.1 per cent for the same period in 2023, and represents the lowest rate of closure since the first half of 2017, when it stood at -0.5 per cent. The 2024 first-half figure is also lower than the UK average of -1.1 per cent.

Across the UK, convenience stores, coffee shops, “value” retailers and cafés are the only categories experiencing growth at a rate of more than one store per week - as several big grocery chains prioritise the opening of convenience stores, and new drive-thru outlets, particularly in out-of-town locations, continue to be in demand.

Ross Marshall, a partner at PwC Scotland, said: “Across Scotland, net store closures are stabilising, and there continues to be a shift towards consumers prioritising experiences, time spent with family and friends, and convenience.

“The way we shop and use our high streets is still evolving, but that doesn’t mean members of the public don’t value their local high streets. Our recent Good Growth for Cities Index showed that, as an economic performance indicator, Scots placed a higher weighting on the quality of high streets than the UK average.”

New drive-thru outlets, particularly in out-of-town locations, continue to be in demand, according to the PwC report.

He added: “As the popularity of online shopping shows no sign of waning, and consumers value the perks of retail park destination shopping - like free parking - there’s a need for policymakers to come together with communities and other key local stakeholders to support the adaptation and long-term future of our high streets.”

The analysis revealed that retail parks remain the most resilient outlet type, with a closure rate of just -0.3 per cent in Scotland, versus -0.8 per cent for high streets and -0.9 per cent for shopping centres.

The latest research reinforces a UK-wide trend witnessed over the last three years since the pandemic-era purge of retail, hospitality and service outlets, although the peak closure rate of -2.8 per cent for the same period at the height of the pandemic has recovered to a more stable landscape since 2022, PwC noted. While categories such as chemists, banks and pubs make up half of all net closures nationwide, several other categories that have traditionally experienced high closure rates - such as fashion, furniture and electrical retailers - have witnessed an improvement in 2024.

Last week, business leaders warned that further regulatory burdens and higher taxes would bring into question whether the Scottish Government is “truly focused on Scotland’s economic recovery” after a dismal summer for the retail sector north of the Border.

Figures released by the Scottish Retail Consortium (SRC) revealed that total sales fell 0.5 per cent last month, compared with August 2023. This fell short of the 12-month average growth of 1 per cent, though once adjusted for the effects of inflation, last month’s year-on-year decline was a more modest 0.2 per cent. It followed negative sales outcomes for June and July.

SRC director David Lonsdale said: “Retailers have shown tremendous fortitude and resilience to come through the tribulations of the past few years of the pandemic and cost crunch. Nonetheless, it remains a testing time for the industry with continuing pressure on household finances and retailers striving to trade profitably whilst the government is increasing regulation and pushing up business rates levied on shops and other commercial premises.”

Responding to the latest PwC data, George Holmes, managing director at business finance specialist Aurora Capital, said the retail sector faced a number of ongoing challenges.

“As businesses struggle with rising costs and changing consumer habits, it’s clear that many are finding it harder than ever to stay afloat,” he noted. “Greater support is needed, particularly for SMEs [small and medium-sized enterprises], to prevent further closures. The new government has promised business rate reforms, which could massively help struggling shop owners.

“It’s vital that our outdated rate system is overhauled, and I hope to hear more about the government’s plans in next month’s Budget. This is a crucial step to ensuring that more shops remain open, protecting jobs and communities across the UK.”

PwC also noted that the proportion of retail sales online had stabilised and was slightly declining in some categories.

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