UK Retailers: Seek Further Government’s Support to Evade ‘Imminent collapse’ of Businesses

As per Confederation of British Industry (CBI) report, the two-third of the businesses in the United Kingdom had been negatively impacted due to novel coronavirus as many of them are suffering from cash flow difficulties. The report was published in April 2020 in which CBI initiated review on the high street and online vendors’ sales condition. As per the media report, every sector in the United Kingdom reported a drop in their sales figure, but clothing & footwear, furniture & carpets and recreational goods outlets were badly walloped during the period of coronavirus lockdown.

CBI Chief Economist, Rain Newton-Smith, confirmed that coronavirus lockdown had been hammering UK retailers extremely hard because of which two-fifths of retail outlets have already closed entirely. He further revealed that sales of foodstuffs and other necessary products has also started falling due to consumers cutting back on their spending. However, the UK government had shown some good indication by providing many schemes to protect the businesses from their financial crunch.

In such a situation, the British Retailers have expressed the need for more backing from the government to avoid the downfall. As per the media report, the British Retail Consortium wrote a letter to Chancellor Rishi Sunak and small business minister Paul Scully, which stated that the existing bailout funds, reliefs and loans not enough to save firms from collapsing and that the crisis must be addressed on urgent basis well before the June quarter day.

The CBI stated in the previous month that approximately 79 percent of retailers are facing challenges due to yearly fall in the operations as compared to 11 percent retailers, which showed an increase in activities. However, Boris Johnson stated on 10th May 2020 that the current scenario of the country shows that there is a possibility of reopening of the retail shops from 1st June 2020. He also revealed the information for the opening of primary schools.

British Retail Consortium chief executive Helen Dickinson discussed the Prime Minister’s view where safety is centric in determining shops reopening. Dickinson noted in his statement that strategy is required for retailers as well as for shopping, which would allow safe steering to the retail centres.

In a letter, BRC said that many companies are working with minor margins and in many of the cases, the companies haven't earned income for many weeks, which pushed them at tremendous risk. The letter further revealed that even if the lockdown is removed, the retail companies are likely to take more time to recover. Through this letter, the United Kingdom retailers signalled British authority that the government's previously announced schemes would be insufficient to break the imminent collapse of the UK retail companies' operations.

Retail Scenario in the United Kingdom amid novel coronavirus lockdown

United Kingdom’s high street retail sales has reportedly decreased by approximately 17.9 percent as well as in-store sale dropped by 34.1 percent on like-for-like basis in March 2020. Additionally, fashion stores sales also plunged by 40.4 percent; in contrast, lifestyle shops lost in revenue by 24.6 percent over the month. However, due to lockdown, online sales surged up with non-store like-for-like sales improving by 13.7 percent in March 2020.

As per the employers organisation’s distributive trades survey, the activity level of the retailers has reduced after lockdown in the UK. The study, conducted on 70 retailers between the end of March and mid-April, had highlighted following readings:

• Approximately 31 percent of retail companies confronted restrictions for the external funding facility. Around 96 percent of retailers reported cash flow problems, with 40 percent of retailers facing challenges in meeting tax obligations.
• As per the survey, around 39 percent of the retail companies have shut down their activities because of novel coronavirus lockdown.
• 71 percent of the respondents said that activity level declined on a year earlier. However, 16 percent respondents reported an increase.
• Lastly, the survey reported that one-in-three companies have placed around 75 percent of their employees under government-backed furloughing schemes whereas 8 percent showed permanent employees layoffs.

According to the Chief Economist at the CBI, Newton-Smith, the government’s job retention scheme is giving some relaxation to the corporate even though the income of many employees of the retail sector is at danger. He additionally stated that since the start of March 2020, the UK government told the companies to furlough the staffs for three months’ despite laying them off. The government has been compensating up to 80 percent of employee’s salary or a maximum of £2,500 per month per employee.

Head of retail and wholesale at BDO, Sophie Michael told media last month that March 2020 has been the worst month for the high street retailers as novel coronavirus outbreak had impacted the demand of discretionary products. Sophie Michael further said that pandemic has largely impacted in-store spending only as customers are feeling safe to purchase online.

Let’s talk about latest government schemes undertaken to safeguard businesses in the United Kingdom

• The news is coming in that UK Ministers are expected to extend job retention scheme until September 2020, but at a reduced rate of 60 percent.
• The COVID-19 Statutory Sick Pay Rebate Scheme available to companies at existing rates of SSP. Through this, the company can wage to present or previous staffs during the time of illness effective from 13th March 2020.
• Under the Small Business Grant Fund, the qualified companies in the United Kingdom would be eligible for a payment of £10,000. In contrast, under the Hospitality, Retail, and Leisure Funding, the qualified companies in Britain would be eligible for a cash grant of £10,000 or £25,000 per property.
• The Coronavirus Business Interruption Loan scheme will support small and medium-sized businesses to access the loans and other different funding up to £5 million. The government has given moneylender the guarantee for 80 percent of financing along with the payment of interest and any fees payable in the first year.