What’s the State of the High Street?
With the news that Wilko has gone into administration, the 90 year old business could be in real danger of liquidation. Having been in financial trouble, to the tune of around £75 million, no buyer came forward to rescue one of the most iconic high street brands. However, now that they are in administration, a buyer could rescue the chain without taking on any of its debt.
Even though there may be buyers looking to take on the brand, it doesn’t guarantee that the Wilko name will survive. The business could still operate but at a much smaller scale. Costs will have to be massively cut down and stores will inevitably close. If a rescue deal is not possible, then the company will go into liquidation.
Of the 400 stores that Wilko has open, a lot of these are located on the high street, where costs are generally higher. Competition, like Poundland, Home Bargains and The Range, is often found in retail parks, which has reduced costs. Even 20 of Wilko’s stores used to be Woolworths, which itself was in financial difficulties in 2008.
Despite its issues, the Wilkinson family took £3 million in dividends between February 2021 and 2022. While the company was struggling at the time, Nadine Houghton, National Officer for the GMB Union, believes that this money could have been spent in technology and improvements that could easily have saved the business from collapse. Home shopping and other improvements could have helped Wilko in the modern age, instead of threatening the jobs of over 12,000 people.
According to data from the British Retail Consortium (BRC), over 6,000 shops have closed in the last 5 years. The majority of these have been in the north and Midlands. Even though plenty of chain stores have closed branches throughout the UK, some of the best loved brands are now gone forever.
In the last 7 years, the UK has lost:
Some of these retailers were able to be partially rescued and still exist in an online format, but their physical stores are permanently closed.
High streets have been in decline for a number of years, thanks to the rise of online shopping. It mainly depends on the geography as the strength of the city economy is a strong indicator of how much disposable income people have. Areas of low productivity in labour markets will have a much weaker demand for high street shops, but highly paid workers in city centres generate more demand.
The effects of the pandemic did nothing to help already struggling businesses, and lockdowns forced plenty of companies to go into administration. Even when businesses began to reopen again, large cities like London, Manchester and Cardiff still struggled because of the advent of remote working. Without the footfall on the high street, there was much less demand to capitalise on. It’s taken a long time for cities to get back to where they were.
Business continues to be tough, even for large retailers and companies. Big name brands, such as Boots, John Lewis and M&S have all had to downsize and close swathes of their stores throughout the UK. Even banks, such as TSB, NatWest and Barclays, are having to close branches to consolidate costs as footfall reduces.
One of the main issues that high street shops face is the crippling business rates they pay in order to stay open. The current system taxes businesses based on these prime locations, but this puts them on the back foot compared to internet-only companies. The changes in retailing over the years have challenged even the hardiest of brands and unless the government reviews them, more chains like Wilko could be lost from our high street in the future.