Picture shown is for illustrative purposes only.
Britain’s high street faces more than 5,000 job cuts after two of its biggest names said that customers were unlikely to return to their old shopping habits after the coronavirus crisis, in the latest blow to the country’s ailing economy.
Health and beauty chain Boots and department store John Lewis on Thursday joined other retailers in warning that they had to close stores to survive after customers moved online and remained wary of returning to town centres.
Boots, owned by Walgreens Boots Alliance, announced 4,000 cuts in a blow to British finance minister Rishi Sunak, who announced his latest plan to save jobs on Wednesday, while John Lewis said it could lose 1,300.
Thousands of job losses have already been announced by the menswear shop TM Lewin, department stores Harrods and Debenhams, fashion stores Oasis, Warehouse, and Arcadia, and the DIY outfit Travis Perkins since the coronavirus outbreak. John Lewis, known as middle England’s favourite department store, said it proposed to close eight stores as online would make up to 70% of sales this year and next, from 40% pre-crisis.
“We believe closures are necessary to help us secure the sustainability of the Partnership,” said Sharon White, chairman of the John Lewis Partnership.
A spokesman for British Prime Minister Boris Johnson said the government stood ready to help after Boots also said it had decided to close 48 optician stores after its UK shopper numbers plunged 85% in April at the height of the lockdown.
The world’s sixth-biggest economy shrank by 25% in March and April and could be heading for its biggest fall in 300 years in 2020, with an unemployment rate on course to more than double to about 10%, according to official projections. That fear of what could lie ahead has put an intolerable strain on retailers, already battling high rents, business rate taxes, tight margins and a rapid shift online.
Since the outbreak, many have failed to pay their rent, in turn hitting commercial property owners such as Intu which has called in administrators due to high debts.
Julie Palmer, partner and restructuring expert at Begbies Traynor, said many businesses would implement drastic change.
“Investment will be poured into parts of the business that are strengthening and pulled from areas that are unsuitable for these modern ways of trading,” she said.
Separately, aerospace engineer Rolls-Royce burned through 3 billion pounds ($3.8 billion) in the first half as the hours flown by its engines halved due to the COVID-19 pandemic, and said it expected a further 1 billion pound outflow in the second half.
The British company, which makes engines for the Boeing 787 and Airbus 350, said flying hours fell 75% in April, May and June, and it had only seen a marginal improvement since.
Chief Executive Warren East said Rolls had started reviewing options for strengthening its balance sheet, and it had 8.1 billion pounds at hand even after the first-half outflow.
“The COVID-19 pandemic has created a shock across the entire civil aviation industry,” he told reporters on Thursday.
“Across the first half of this year, widebody engine flying hours, which we get paid for under our servicing contract, were half of what they were last year.”
Rolls has announced at least 9,000 job cuts, mainly in civil aviation. Its defence business had been resilient, East said, while power systems had been impacted in part.
East said sites could be cut as well as jobs.
Roll’s widebody engine flying hours were expected to recover to about 70% of 2019 levels in 2021, he said, but deliveries were likely to remain subdued.
He said the restructuring would drive a recovery in free cash inflow to at least 750 million pounds in 2022.
Its shares, which are 58% lower since the start of the year, were down 10% at 260 pence at 1500 GMT.
Analysts at JP Morgan said the trading update was “materially worse” than expected.
“If there is a second wave of COVID-19 or a slower than hoped for recovery, then it is very possible, in our view, that the UK government will need to step in to save Rolls-Royce,” they said.
East said Britain had supported Rolls with export finance guarantees, underpinning a 2 billion pound loan facility, but there was no quick fix for the industry.