Job Cuts in the Retail Sector of the United Kingdom

Summary

• 6,000 jobs were cut from the United Kingdom's High Street on 1 July 2020
• Arcadia would lay off 500 employees from its head office
• More than 680 jobs being cut at Harrods due to the impact of Covid-19 pandemic

The unprecedented crisis of Covid-19 has impacted the British economy. Businesses remaining shut because of the fear of virus spread and people restricting themselves to essentials only, led to mass redundancies across various segments. The lockdown might not have killed the virus, but has undoubtedly killed thousands of jobs all over the world.

Though the government has come up with an initiative to prevent mass layoffs, ensuring 80 per cent of salaries to millions of employees, still, various companies are regularly announcing job cuts as their revenues are falling.

About the news

On 1 July 2020, more than 6,000 jobs were cut from the United Kingdom's High Street. Many retailers which announced job losses were Harrods, Philips Green's, Arcadia Group, SSP.

John Lewis was firm with the decision of closing down some of its department stores permanently. Writing a letter to its staff, Sharon Light, the Chairman of John Lewis Group, said the company would close several stores along with its London office. Paying its annual staff bonus next year was also improbable.

Losses resulting from the lockdown have forced SSP, the owner of Upper Crust and Caffe' Ritazza, to remove 5,000 workers out of a total workforce of 9,000 employees in the United Kingdom. The reason for the slashing of jobs is the slow revival of the economy and travel industry.

Harrods, leading luxury departmental store, specified that one-seventh of its 4,800 employees would lose their jobs due to the impact of Covid-19 pandemic.

Arcadia, Sir Philip Green's troubled fashion group, also announced that it would remove 500 employees from its head office, which presently consists of a total of 2,500 employees.

Putting 1,300 staffs at risk, TM Lewin, a shirt-making company and Harvey's, a furniture chain, have announced 800 job losses.

As the Government winds down the furlough scheme and ends it in October 2020, more job losses may be expected, especially in the retail and hospitality sector. The United Kingdom is at the risk of reaching very high unemployment levels, as were witnessed earlier during the 1980s.

The retail stores of the High Street, likely to close down their operations, are Debenhams and the fashion retailers Cath Kidston, Laura Ashley, Go Outdoors, Monsoon, Oasis and Warehouse, Marks & Spencer, Next, New Look and H Samuel.

Pre- Pandemic Scenario for the British Retail Market

2019 was considered to be the worst year recorded in the history of British retail, because the sales fell for the first time in 24 years as a dire performance on the high street dragged down the industry. The total sales declined by 0.1 per cent in 2019, according to the British Retail Consortium (BRC) and advisory firm KPMG, the lowest since 1995.

The total sales saw a decline because of the 0.9 per cent fall in sales in the final two months of the year when the retailers expect most of their annual profits. The online sales increased by 2.6 per cent in November and December which partially led to a decline in the sales. It was said that the retailers were facing problem in shifting to online shopping and more cautious spending, triggered by economic uncertainty and concerns about the environment

Karen Millen, Coast and Forever 21, Watt Brothers, Albermarle & Bond, and Jamie's Italian restaurant group all vanished from the high street last year. Retailers such as Topshop, Dorothy Perkins, Arcadia, HMV, Laura Ashley, Bathstore, LK Bennett and Patisserie Valerie are also closing various outlets because of the restructuring.

More than 12% of stores stand empty compared with 11.5 per cent a year ago in June 2019.

Post- Pandemic Scenario for the British Retail Market

The lockdown implemented by the respective Governments to prevent the spread of COVID-19 in their countries have greatly affected the retail business. Most of the stores, for instance, garments, electronics, mobile phones, furniture, hardware, etc., except stores selling Essential Food & Grocery items, have been shut globally.

Shops selling non-essential goods are reporting a huge reduction in their sales. Even retailers of essential items are facing losses as they aren't allowed to sell non-essential items, which would help them garner higher margins.

According to a survey carried out between 27 March and 15 April by the Confederation of British Industry (CBI), which surveyed 70 retailers in the three weeks after the United Kingdom announced lockdown- 67 per cent of retailers were of the view that the Covid-19 outbreak had a negative impact on their sales, 39 per cent experienced a total shutdown of their activity due to the outbreak, 44 per cent were furloughing their staff, 8 per cent had to layoff staffs permanently, 96 per cent experienced cash flow difficulties, 40 per cent were facing difficulties in meeting their tax liabilities and 31 per cent had constraints on the availability of external finance.

Primark, the clothing retailer, expects to lose £ 800 million in terms of their revenue and profits to decline by two-thirds in 2020. The company's revenue fell by 75 per cent during the lockdown, between 1 March 2020 to 20 June 2020.

Effect of Covid-19 on the employment of the United Kingdom

Bellow table represents the employment rate, unemployment rate and economic activity of the United Kingdom for the period February 2020 – April 2020:

(All the figures are in per cent)

Source: Office of National Statistics, UK Government

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Conclusion

Almost two- thirds of the retail costs are fixed costs, which is putting financial pressures on retailers in times of low demand. The retail sector is experiencing severe liquidity challenges, which is leading to massive unemployment. The inflow of cash has come to a standstill.

The Government of the United Kingdom has provided incentives under the furlough scheme, but that comes to end in October 2020. It will be interesting to see what will be the situation after that and how the government encourages retail firms to retain and hire staff during this challenging corona period.

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