Coronavirus has proved a deadly reckoning for Britain’s department stores and clothing chains. News that Boohoo, the online retailer founded just 15 years ago, is to buy the website and brand of Debenhams, which traces its roots back to 1778, is emblematic of the crisis gripping the industry. Successive lockdowns to stop the virus spreading have forced shoppers online and prompted the closure of thousands of bricks-and-mortar shops. Once familiar brands, including Laura Ashley, Oasis and Warehouse, have all but disappeared from the high street. Now Debenhams and Topshop, which is in talks to be bought by Boohoo’s rival Asos, are set to survive only as online names.
In truth, there was overcapacity on the high street even before Covid-19 accelerated the shift to online shopping. Many retailers had failed to keep up with the changing shopping habits of young consumers and were unable to compete with innovative online-only rivals. Those still opening bricks-and-mortar shops chose out-of-town retail parks where rents were lower. The roots of the particular problems at Debenhams and Philip Green’s Arcadia group also predate the pandemic. Private equity bears part of the blame for the collapse of Debenhams. During a brief spell in private ownership, the chain was laden with debt and much of its freehold real estate sold and leased back. The company reduced its debt load after a return to the stock market in 2006 but that left little for investment in stores and ecommerce. Similarly, Sir Philip played a part in the demise of his Arcadia fashion empire, starving it of investment and innovation over several years.
Irrespective of the reasons behind particular company failures, there are wider repercussions for Britain’s towns and high streets that cannot be ignored. Analysis by the Centre for Retail Research estimates that more than 15,700 shops closed last year, resulting in some 176,700 retail job losses. At stake is not just the future of international fashion destinations such as London’s Oxford Street, home to Topshop’s flagship store and a vast Debenhams outlet. Such shops acted as high-street anchor tenants across the country, attracting local trade and footfall. Their demise puts the future of hundreds of smaller town and city centres at risk.
The government must play its part in slowing the retail shake-out, in part to preserve those activities that ought to be saved and to allow time for a post-Covid transition to the high-street of the future. There is no reason why non-food, bricks-and-mortar retail should die. In fact, fashion ought to be one element that can survive. One area where the government should act immediately is to reform the business rates system. The 12-month business rates holiday, introduced in March last year after the pandemic first struck, needs to be extended further. Successive relief schemes have left many smaller businesses paying very little, while the rate for those that do pay has jumped from 34 per cent of “rateable” values in 1990 to more than 50 per cent now. It is also time to find ways to level the taxation playing field with online-only retailers whose absence of shops leaves them paying much lower business rates.
There is no reason for the government to subsidise retailers that would otherwise collapse. In some cases, shops can better be repurposed into venues for alternative uses such as cultural activities or entertainment. But it makes little sense for Britain’s high streets to lose retail outlets altogether. All this is possible but it is up to the government to put in place the right conditions to help the regeneration of the high street.