Half of Top UK Retailers Struggle to Stay Afloat

  • Store-based profit margins for top UK retailers halved in less than a decade
  • Operation costs increased by 10.8% since 2014 due to inflexible leases and changing shopping habits
  • Retailers now occupy up to 20% more store space than needed
  • Business rates rose by £7.5bn in 2018, exceeding rental values in some areas
  • Rental retail and capital value expectations at 10-year lows
  • Investor confidence in UK retail space at lowest since 2007
  • High Street survival depends on collaboration with landlords and local authorities

A study by Alvarez and Marsal in partnership with Retail Economics reveals that store-based profit margins for the top 150 UK retailers have halved since 2011, dropping from 8.8% in 2009/10 to 4.1% in 2017/18. The report attributes this decline to rising operational costs and inflexible lease structures, as well as changing shopping habits. Retailers now occupy up to 20% more store space than they can justify financially. Business rates increased by £7.5bn in 2018 due to a government revaluation, surpassing rental values in some areas. Rental retail and capital value expectations have reached 10-year lows as investor confidence wanes. Richard Fleming, Alvarez and Marsal’s managing director, says the High Street’s future depends on strategic partnerships with landlords and local authorities to adapt to a new era of retail.

Factuality Level: 8
Factuality Justification: The article provides accurate information from a reputable source (Alvarez and Marsal) and presents objective data on the decline of store-based profit margins for UK retailers. It also includes relevant quotes from Richard Fleming, the managing director of Alvarez and Marsal, discussing potential solutions to the issue.
Noise Level: 3
Noise Justification: The article provides relevant information about the decline in store-based profit margins for UK retailers and identifies some of the contributing factors such as increasing operation costs, business rates, and changing shopping habits. It also offers potential solutions for survival in the new era of retail. The language used is not overly sensational or misleading, and it stays on topic without diving into unrelated territories.
Financial Relevance: Yes
Financial Markets Impacted: UK retail sector
Financial Rating Justification: The article discusses the decline in profit margins of UK retailers, increasing operation costs, and the impact on business rates and rental values, which directly affects financial performance and operations of companies within the sector. It also mentions potential opportunities for collaboration with landlords and local authorities to address these challenges.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: There is no extreme event mentioned in the article.

Reported publicly: www.retailsector.co.uk