- Video report by ITV News Business Editor Joel Hills
The chairman of Debenhamswarns that the increasing popularity of online shopping has left many high street retailers paying rent they can no longer afford.
In an interview with ITV News, Sir Ian Cheshire urged landlords to wake-up to the changes in shopping habits and, where appropriate, renegotiate leases which he compared to a “straight jacket...killing more and more retailers”.
Since Christmas a series of established retailers have experienced problems, some of them terminal.
Toys R Us has gone bust; Maplin and Jaques Vert are in administration and closing stores; New Look, Select Fashion, and House of Fraser have all admitted they are insolvent in their current form and are pursuing Company Voluntary Agreements (CVAs) with creditors in an attempt to reduce their debts.
The likes of Mothercare and Debenhams are experiencing an unsustainable slide in sales.
Sir Ian believes that on current trends the decline in the high street will accelerate unless the government reforms the tax system and landlords show greater flexibility.
“Landlords haven’t changed their model, they are still stuck in a 19th century leasehold model, with business rates (a property tax) on top that are actually Elizabethan in how old they are...out tax system doesn’t reflect modern business models," he said.
There’s general agreement that the system of business rates need updating. A year ago the government promised a review, though there’s still no sign of it.
Sir Ian believes the current system gives online-only retailers like Amazon an unfair competitive advantage.
“The reality is the tax-burden isn’t equally distributed...pure plays (internet retailers) aren’t reflecting the true cost,” he said.
Sir Ian used to run Kingfisher - which owns B&Q - and used to chair the British Retail Consortium (BRC). This morning the BRC released the latest sales figures for April - they were extremely weak, even allowing for the distortions caused by a late Easter in 2017.
Of course, some “bricks and mortar” retailers aren’t struggling. JD Sports, Primark, Lush are trading well and some will argue that the internet only kills retailers who are badly managed. Sir Ian accepts that some people will see his complaints as something of a whinge but he stands by them.
“I think it is the reality. What you’re seeing is retail facing more change in the past three years than in the previous twenty...it’s a big structural shift which is basically saying old models have to be reinvented. If you’re starting out now you’d have much less space, much more online and much more flexibility. No one will now be signing 20 year leases”.
Sir Ian warns that unless landlords change their attitude then retailers will continue to go bust and value of commercial property will decline.
Debenhams has said publicly that it has approached its landlords with a view to renegotiating some of the leases on it UK stores. The company hasn’t indicated how those talks are progressing.