Many consider the high street to be dying as shops are without tenants, sales from high street customers are declining and visitors to the high street plummet. The growing dominance of the online market has seen £7 billion of sales move online in clothing and footwear alone according to GlobalData and, consequently, retail shops on the high street are suffering. Loca Data Company reports that more than 4,400 shops, pubs or restaurants have been left empty in the first six months of 2018. Whilst retail stores have suffered from the falling visitors to the high street, pubs have been most negatively hit with a 6.5% decline in sales. BDO High Street Sales Tracker and LDC reports indicate that sales in high street stores have declined 2% year on year and November 2018 saw the ninth consecutive month of falling in-store sales. Major closures have been witnessed with the likes of Toys R Us collapsing along with a number of firms entering administration such as Poundworld and Maplin. Some are struggling to survive with Homebase and other chains seeking legal advice to close stores and renegotiate rent in last ditch attempts to fight off online rivals.
Although it is not entirely doom and gloom for the high street with barbers and beauty salons in fact growing during the recent period, it nevertheless demonstrates the growing shift to online shopping with the deteriorating need to visit the high street to shop. For those who specialise in services that cannot be provided online, the high street still remains a prime location and in the first 6 months of 2018, 349 barber shops had opened. At least getting a haircut is something that will never move online!
Whilst retail stores have suffered, what is the future of high street banks?
The decline of the high street bank
Figures from the Telegraph suggest that in 2017, there were 661 closures by the Big Four, Clydesdale and Yorkshire Bank and TSB. This came after RBS announced they were closing 259 stores. It is now estimated that today there is less than 10,000 high street bank branches, half as many as in 1988 at 20,583.
The decline of the high street bank can lend itself to a number of factors- firstly the financial crisis, secondly the rise of technology and lastly the increase competition to mainstream banks from the Challenger Banks. The financial crisis in 2008 was the first indication of their fall from prominence. Following the economic collapse, banks suffered falling profits and, therefore, in order to cut costs, sold off a number of their high street bank branches. Furthermore, with numerous bank mergers occurring such as Lloyds acquiring Halifax and Virgin Money acquiring Northern Rock, the duplication of branches resulted in further closures.
In addition, the growth of technology within the financial sector, and specifically the rise in online banking, has allowed customers to more effectively manage their money but at the cost of the high street bank. The declining use of cheques which, at its peak in 1990, reached 4 billion, has hit bank branches hard. Customers have the ability to transfer money and make payments from the ease of their own mobile phone, reducing the need to visit high street banks.
The decline in visits to high street banks has further been diminished by rising competition, notably in the online sector. Start-ups are growing rapidly by offering their clients the smaller loans often neglected by the larger banks and the ease of managing their money. These firms have grown rapidly in recent years as rivals to the typical high street bank. Oaknorth, one such firm, was established just five years ago and has just been valued at $2.3 billion in 2019 with its loans totalling roughly $2.5 billion. The newly set up firm utilises technology platforms to accumulate data on the potential borrower providing a more detailed picture of their history and current financial position. The online nature of the firm ensures efficiency and they pride themselves on delivering on loans “first meeting to cash” within 30 days.
Revival?
However, is there potential for the revival of the high street? Mike Ashley certainly believes so from his recent purchases and actions. In 2018, Mike Ashley bought House of Fraser for £90 million with his long term dream of turning them into the “Harrods of the High Street”. He also acquired Evans Cycle who were similarly in administration for just £8 million. This brings his high street empire to owning House of Fraser, Flannels and Evans Cycle whilst having 29% of Debenhams and 27% of French Collection.
The Sports Direct tycoon showed intent to expand this empire by bidding for HMV but was narrowly beaten by Sunrise Records, owned by Doug Putman. His recent bid for Patisserie Valerie in February 2019 indicates his further attempts to grow his high street links. Administrator KPMG closed 70 of Patisserie Valerie’s outlets and roughly 900 jobs were lost as a result. With 121 stores still open, they have just announced a successful purchase of the company by another firm which protects the remaining 2,000 staff and solves the debt crisis within the firm. Although Mike Ashley has been hailed as the “saviour of the high street’, it still remains unclear what his long term intentions are or whether he can successfully revive the high street.
Whilst some areas have been particularly badly hit by the collapse of the high street, other areas have attempted to tackle the problem and potentially offer an example to follow. Bishopthorpe Road in York was voted Britain’s Best high street in 2015 with its array of top-quality cafes, restaurants, pubs, small supermarkets. It hopes this can provide guidance to help revive the high street in other areas too.
Summary
The high street has been hit hard by the growth of the online world with banks in particular being challenged by the growth of start-up online banking firms. Whilst Mike Ashley has made his initial intentions clear through his purchasing of the high street, the long term future of the high street is in no doubt questionable.
Rory Hazelton
Commercial Law Section Feature Writer
23 March 2019
Bibliography
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Disclaimer: The views expressed are that of the individual author. All rights are reserved to the original authors of the materials consulted, which are listed in the bibliography above.
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