Executive Summary

In the UK, recent high-profile retailer difficulties have been reported as representing an “embattled” retail sector. However, we believe the fundamental challenge is actually one of undifferentiated stores facing ever-growing competition.

• UK retail sales continue to grow above inflation, fueled by greater borrowing and less saving.
• We expect to see a new round of closures, company voluntary arrangements (CVAs) and bankruptcies among middleground generalist retailers. The UK’s inflationary environment is merely the trigger for this, rather than the underlying cause.
• Competition and near-unlimited choice is the fundamental challenge for large-store generalist retailers. The abundance of choice spans specialized pure-play retailers, focused specialist stores, brands selling direct to consumers and alternatives to conventional retail such as rental, resale and subscriptions.
• Last year, our weekly Store Openings & Closures Tracker recorded 921 store closures by major UK chains. We expect this number to rise in 2018, led by structurally challenged generalist stores.