Times they are changin’ as yet more retailers set to go bust

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WHEN John Lewis managing director Charlie Mayfield spoke in Edinburgh recently, he waxed lyrical on the opportunities offered by the retail sector.

It is still, he said, one of the few places where a person can begin their career on the shop floor and rise to become chairman of the board.

One in ten people in Scotland works in retail – and one in every eight households has someone employed in the sector – but our high streets are changing fast and the rate of change could have far-reaching consequences for the economy.

This month HMV, Jessops and Blockbusters all called in the administrators – with the potential loss of thousands of jobs and the closure of hundreds of stores.

And there are likely to be more to come. Ken Patullo of Begbies Traynor insolvency experts says: “Before Christmas, we predicted that the season would be anything but festive for many on the high street. Our research in December, measuring corporate distress levels, found that ‘critical’ financial issues were facing almost 140 retailers despite these businesses being at the peak of the annual cash cycle. Unfortunately, for so many to be in distress at this time indicated that 2013 was likely to see a rising number of retail insolvencies, and this is already proving to be the case.

“Increasingly, we are seeing retailers being used for ‘window shopping’ by consumers who then go on to make their purchases online at discount prices.”

Figures from the Scottish Retail Consortium suggest one in ten shops in Scottish high streets are currently lying empty – but in some areas the figures are far higher and the pace of change is increasing.

In the centre of Cumbernauld figures from the Local Data Company suggest 42 per cent of shops are currently vacant. And while newer shopping centres, with a greater emphasis on leisure, are doing well, others are suffering. Fort Kinnaird near Edinburgh is one of the shopping centres identified by the Local Data Company as hardest hit by the current wave of closures, with three outlets facing possible closure.

The change is being brought about by a shift to online shopping coupled with the growth of giant supermarket retail outlets. SRC figures suggest online shopping in Scotland rose by 17 per cent last year while online deliveries rose by 400 per cent.

David Martin, head of research for the Scottish Retail Consortium, said: “There is a change in terms of how consumers are shopping. More of us are going online and more of us are going to out-of-town shopping centres.”

The current economic uncertainty means retailers are steeling themselves for another tough year and having to discount further and further in order to entice customers through the door.

“This year there will be very little or no growth. There is a blizzard of vouchers out there.”

At the same time the cost of doing business is growing. Despite the squeeze on profits business rates in Scotland rose by 5.6 per cent last year and are expected to increase by 2.4 per cent next year.

With 240,000 people in Scotland employed by the retail sector, the SRC believes the Scottish Government should freeze business rates in order to give the high street retailers more time to adapt to change. The calls are echoed by the Scottish Chambers of Commerce. Head of policy Garry Clark points out that current business rates were calculated in April 2008 at the height of the economic boom. They are not due to be recalculated until 2017, despite the huge changes that have taken place on the high street.

The next couple of years will also see a lot of long-term leases coming to an end, which could accelerate the rate of change – particularly when it comes to empty shops.

“It is something we need to address. We have so many retail leases coming up for renewal over the next two years. A lot of retailers are looking at reducing the number of their stores. We are going to need a very different offering in the high street.”

The Labour Party believes the end of tax relief on empty properties to be introduced in April will make things worse.

Labour’s Ken Macintosh, MSP, said: “One thing our shops don’t need is to be further squeezed by a Scottish Government over reliant on a huge hike in business rates, and then hammered with the dramatic increase in tax on empty properties when they then fail.

“The SNP have been well warned about the potential impact on our high streets of abolishing empty property relief and we can see the extra tens of millions they are expecting to take in from putting up business rates.”

He also said that the Scottish Government should take a tougher line with Amazon – the online giant, which has been criticised for avoiding corporation tax, was given a £9 million grant towards its new distribution centre in Dunfermline.

“Giving public subsidies to companies like Amazon which don’t pay their fair share of tax not only pours salt in the wound, it is also likely to prove counter-productive in the longer term too.”

Scottish Government minister Derek Mackay said he was aware of the problems being faced by the retail sector and of the changes on the high street: “There is not magic answer to this. It is quite complex and different areas have different problems.”

He said the Government is currently looking at ways of giving local authorities more discretion over business rates as well as looking for ways to support small businesses and start ups in town centres.

Meanwhile, architect Malcolm Fraser, chair of the Scottish Government’s Town Centre Review, due to be published in the spring, is looking at the longer term future.

He says: “I’m old enough to remember Princes Street when there were office buildings there.

“Town centres, particularly in Scotland, were not always about shops.

“One of the glories of Scottish cities is that people live in the centre of them.

“The retail sector isn’t going to disappear but it is going to contract and that is going to lead to boarded up-shops and changes to the fabric of town centres. Things are going to be different.”