Covid-19 Impact: Job Redundancies Continue to Rise in High Street Retail

Summary

• Except for the north-west of England, retail employment had declined across most of the regions during 2015-18
• The online spending done by the consumers have nearly tripled in ten years from just 4.9 per cent in 2008 to 17.9 per cent in 2018
• One out of three businesses in the United Kingdom intends to remove their employees during Q3 2020

The onslaught of the coronavirus pandemic has severely impacted the Retail sector. The coronavirus induced lockdown led to empty streets, deserted public squares, resulting in decrease in footfall at the high-street retail stores as well. This decline of retail on the high street led to the closure of several stores in the wake of a shutdown during the peak of the unprecedented crisis.

The scenario led to several job redundancies as a paradigm shift was visible in the way the businesses are likely to be done. During the unprecedented crisis, shoppers went online for almost everything due to fear of the deadly virus. Therefore, the manpower required to maintain stores declined. Only a few employees were needed to run the operations. For instance, restaurants which were offering take away services did not require that many numbers of employees which they earlier had in the pre-pandemic era.

ONS survey presents a grim picture of retail even before the pandemic

Interestingly, the job losses continue to rise in the pre-pandemic era as well, according to a recent release by the ONS (Office of National Statistics). Except for the north-west of England, retail employment had declined across most of the regions during 2015-18. In 2018 companies such as New Look, Toys R Us, and Maplin went into administration, while 2019 and 2020 saw firms like MotherCare, Debenhams, and Jack Wills, Victoria's Secret following suit. Though some of these still exist in some form or the other, the future of the traditional High Street still looks uncertain.

Since the evolution of e-commerce and online businesses, high street retail has been a cause of concern for at least a decade now. The outbreak of coronavirus pandemic has taken the trend to the next level. Most of the businesses in the retail sector are retuning their business models to acquire and service their customers through the online business delivery model.

According to the data from ONS, the online spending done by the consumers have nearly tripled in ten years. It has increased from just 4.9 per cent (2008) to 17.9 per cent (2018). In addition, 54 per cent of senior citizens (aged 65 years and over) have shopped online in 2019. Nearly 90 per cent of adults used the internet daily in 2019.

Is there a gradual shift in the shopping pattern?

With social distancing being the new normal, and people being encouraged to work remotely, the future of high street retail looks a bit gloomy until the world gets a vaccine to cure the coronavirus pandemic. However, the deadly virus has certainly influenced the shopping behaviour of consumers and delivery models of businesses. During the unprecedented crisis, as consumers switched to online platforms for shopping, online sales as a percentage of retail sales made a new high of 22.3 per cent in March 2020.

This change in shopping pattern would ideally translate into several job redundancies, which is the by-product of an unprecedented crisis triggered by the novel coronavirus. Several Britons have lost their jobs during the first half of 2020.

Boots, a health and beauty products' brand, had earlier announced a reduction of 7 per cent of its workforce or 4,000 jobs by shutting down 48 optician outlets and reducing its headcount at its Nottingham office. A chain of high-end department stores, John Lewis announced that it would be closing eight of its stores permanently out of a total of 50 stores. Department stores in Birmingham and Watford would also close with 1,300 job losses.

According to the SMMT (Society of Motor Manufacturers and Traders), the UK's automotive sector could witness job cuts by more than 16 per cent due to the economic impact of the novel coronavirus. Aston Martin Lagonda Global Holdings PLC (LON:AML), the UK car making company, had announced around 500 redundancies in June 2020. The largest British automotive firm Jaguar Land Rover, popularly known as JLR is likely to axe nearly thousand non-critical roles in the United Kingdom due to the economic impact of the novel coronavirus.

Popular food outlets, Upper Crust and Caffe Ritazza, managed by SSP Group Plc (LON:SSPG) had recently announced plans to reduce its employee base in the UK by more than 50 per cent due to the growing economic impact of the coronavirus crisis, which has resulted into a dramatic fall in the number of travellers. These food outlets are based at airports and railway stations.

What are different institutions predicting the employment scenario in the UK?

According to a survey conducted by Chartered Institute of Personnel and Development (CIPD) and Adecco Group, a recruitment company, of 2,000 companies, one out of three businesses (33 per cent) in the United Kingdom intends to remove their employees during Q3 2020 (October to December), as the support from the government in the form of Job Retention Scheme is going to be pulled back by the end of October 2020. The issue is especially intense in case of privately owned businesses, with approximately 40 per cent of them expected to make job cuts.

The Business Impact of Coronavirus (COVID-19) Survey (BICS) survey revelated that 54 per cent of business respondents reported a fall in turnover as compared to what is expected for this period of the year.

According to the forecast made by Centre for Retail Research, 20,622 stores could close in 2020 (in comparison to 16,073 in 2019), and the job losses will increase to 235,704 people in 2020 (2019: 143,128).

The cost involved in running retail outlets such as rents, business rates, and labour costs are proving very expensive. Higher costs, slower growth in sales, lesser profit margins and extremely competitive environment has resulted in low profitability. Coronavirus lockdown has affected the retailers severely. It would be interesting to see as to how things would shape up after the state backed furlough scheme is discontinued in October.