The Works, a UK-based bargain retailer with over 500 stores, announced a strategic review of its store portfolio, including the closure of five underperforming branches. While three closures have already taken effect in Iver, Elgin, and Heighley Gate, two more are scheduled by the end of April 2025. The retailer emphasizes this is standard practice, balancing closures with store improvements, relocations, and new openings. The Works has already launched three new stores since May 2024, with another planned in Cirencester. This measured approach reflects a commitment to adapt to changing market dynamics and prioritize locations that best serve their customer base. The company also announced a plan to open approximately 60 new locations over the next five years, signaling a commitment to growth despite current market challenges.
The retailer’s approach mirrors broader trends in the retail sector, grappling with declining footfall, rising costs, and the impact of recent budget changes. Footfall has yet to recover to pre-pandemic levels, and rising operational expenses coupled with evolving consumer spending patterns are creating a difficult environment. Government policies, including increases in National Insurance Contributions (NICs) and the National Living Wage, are adding further pressure on businesses. These increased costs are impacting retailers’ ability to operate profitably, especially during a cost of living crisis that affects both businesses and consumers.
Several retailers are attributing store closures directly to the challenging economic climate and policy changes. ShoeZone, for instance, cited rising costs, especially due to the budget changes, as a direct cause of store closures. They are focusing on shuttering their “unviable” branches. Other prominent retailers are also restructuring. WHSmith, for example, announced the closure of 18 high street stores, shifting its focus to the more profitable travel sector. Similarly, Homebase, after falling into administration, will close 13 stores despite CDS (owner of The Range and Wilko) taking over 70 other Homebase locations. These closures represent not just a loss of retail presence but also job losses, impacting local communities and economies.
The retail sector’s struggles are multifaceted. The pandemic accelerated the shift to online shopping, impacting physical store traffic. Rising energy costs have also squeezed margins, putting additional strain on already tight budgets. The compounded effects of these factors, along with budget changes increasing labor costs, paint a stark picture for the industry. The British Retail Consortium estimates that the rise in NICs will cost the retail sector £2.3 billion, further exacerbating the existing financial pressures.
The ongoing cost of living crisis also influences consumer spending habits. Shoppers are becoming more cautious with their purchases, leading to reduced demand and further impacting retail revenues. The Centre for Retail Research (CRR) predicts the closure of approximately 17,350 retail sites in 2025, a significant increase from the 13,000 closures in 2024. This escalation points towards a deepening crisis that could reshape the high street landscape.
The impact on employment is also substantial. In 2024, the retail sector saw a loss of nearly 170,000 jobs, marking a significant increase compared to previous years and the highest annual job loss figure since the pandemic. This dramatic increase highlights the industry’s struggles to adapt to changing market conditions and absorb rising costs. The CRR director, Professor Joshua Bamfield, anticipates a bleak 2025, potentially with over 200,000 job losses. He emphasizes that the combination of rising operating costs and reduced consumer spending power will continue to negatively impact the sector, possibly exceeding the job losses seen during the height of the pandemic in 2020. This dire prediction underscores the need for strategies that address the underlying challenges facing retailers and support the workforce during this difficult period.