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Bleak future for UK high street

While the national rate has been stable at 14.3% the wide differences in vacancy rates (from 0% to 36%) continue to affect an increasing number of centres, with prime centre "core" areas remaining healthy but secondary centres and outlying areas struggling as multiple retailers exit for larger centres, out of town locations or as a result of business failure.

The extremes in the changing fortunes of towns with regards vacancy are from decreases of -12% to increases +15%.

The report highlights the key structural issues driving vacancy rates and provides unique evidence of the reality of many town centres up and down the country. Weak consumer confidence, rising unemployment, the growth in retail sales by supermarkets and the internet, a significant number of retail leases coming to an end and the uncertainty in the banking sector, all leads to the view that shop vacancy rates are set to rise in 2012. Underpinning the majority of town centres are independents (>5 outlets) who are now 66% (+1%) of most town centres. What is the future for them?

A significant majority of the above average vacancy rates are to be found in the Midlands and North. Indeed this applies to all the top ten worst performers including, for example, Stockport with a vacancy rate over 30%. Nottingham, Grimsby, Stockton, Wolverhampton, Blackburn, Walsall and Blackpool all have vacancy rates over 25%.

Similarly, the best performing centres are mainly in the South and West. Although York and Harrogate see vacancy rates below 10%, so do Exeter, Kingston, Camden, Cambridge, Taunton, Salisbury and St Albans, the best performer with an 8.2% vacancy rate.

January 2012 is the first anniversary of the 20% VAT rate. As we move forward through 2012 the inflationary effect of increasing the tax falls out of the equation and the headline rate of inflation should fall. Additionally, the rises in fuel and energy prices seen in 2011 should fall out of the inflation calculation towards the end of 2012, bringing inflation closer to its 2% target.

Inflation in non-food prices was largely driven by the VAT increase. This should mean that 2012 sees a modicum of deflation in non-food prices on the High Street. However, an increase in sales tax has proved to be a useful scapegoat for retailers seeking to improve margins and, once the effect is past, it may highlight the inherent conflict between discount pricing and profitability.

The British Council of Shopping Centres estimates that one-fifth of UK shopping malls are in financial difficulties, with around 20 secondary shopping centres already on the market.

Liz Peace, Chief Executive of the British Property Federation, said: "Today’s figures show that while some high streets are thriving, others remain locked in a spiral of decline. To turn these areas around will be difficult and will need landlords, retailers and local authorities to work closely together to adapt to changes in the way we shop.

"There are a number of proposals on the table for tackling declining town centres  – many from the Portas Review – and we believe it is vital to stop talking and get on with implementing them as quickly as possible. Bringing empty shops back into use by allowing conversion to residential is one that could be implemented quickly and easily."

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