The UK high street has been hit by a perfect storm thanks to a combination of the growth of online shopping, upward-only rent reviews and soaring business rates. And that’s keeping the sluggish economy, Brexit, the general election and the rain out of it. With the key Christmas trading period behind us, insolvencies and CVAs (company voluntary arrangements) – a device allowing retailers to continue to trade while renegotiating their debts and crucially their rental obligations – will probably re-accelerate. But although the UK high street may be down for now, on a long-term view we believe there are some key areas which will continue to thrive.
Despite considerable headwinds, we believe the high street is too ingrained in the fabric of British life for it to vanish completely from our towns and cities. But a painful evolution is underway. From an investment standpoint, we believe the bricks-and-mortar businesses best placed to survive will be those that take a multi-channel approach, providing customers with the choice and convenience they demand.
Discount retail can continue to entice consumers to the high street as value-for-money offers will be impossible for online retailers to sustainably replicate. Finally, there is an opportunity for bricks-and-mortar businesses to creatively integrate interesting experiences and services – like cafes, restaurants, salons and gyms – into their formats.
Amy Chamberlain, global industry analyst, Newton Investment Management.