There was some good news from the high street last week when Marks & Spencer published its 2026/2027 half year results, reporting an uptick in profits following the serious disruption to its operations caused by last year’s cyber-attacks. Despite the increase in profit there was an acknowledgement that trading conditions remain challenging. That begs the question about how other operators are faring and what might lie ahead for our high streets?
Economic factors
In recent years, there has certainly been more stability amongst high street retailers than in the immediate post-covid period of 2022-2024, but the pandemic has left its mark on the sector and, whilst shopping centres and retail parks have continued to attract footfall, lockdown habits of working from home and increased reliance on online shopping have meant that certain high street retailers have found the bounce back more difficult than others.
When you combine these changing habits with government initiatives to deal with the budget deficit (i.e., increases in the National Minimum Wage and national insurance cost), the very practical effect is that employment costs have gone up. There have also been significant rises in business rates liabilities, which particularly affects retailers with a large bricks and mortar footprint. This all means that the cost of doing business has gone up. You then have the wider cost of living crisis impacting spending habits, meaning that the high street retailers, in particular, continue to face a perfect storm, leaving management teams having to deal with an array of economic pressures.
Trends
In the last peak of retail insolvencies, we saw the financial shockwaves result in the complete collapse of a number of major retail chains and well-established high street brands (e.g., BHS, Debenhams). During that period, we had the infamous “wave of CVAs”. This saw a surge of high street tenants attempting (some more successfully than others) to use Company Voluntary Arrangements to streamline their lease liabilities. More recently, we have seen restructuring plans being used as a way to try and right size businesses and deal with over leveraged balance sheets (e.g. River Island and Virgin Active).
The latest retailer to hit the headlines is Poundland, who at the time of writing have lodged a notice of intention to appoint administrators. The latest audited accounts for Poundland have not been published, but the reporting (see here) is that in the last week like-for-like sales were up by 11.4% and that Poundland are trading £1.5 million ahead of budget. In any restructuring you have to be very careful about what snapshot metrics tell you (and what they don’t). Snapshots don’t tell you is what is going on under the hood – how leveraged the business is – and, critically, the attitudes of stakeholders who are supporting the business. The coming days will be critical for Poundland, and those working tirelessly behind the scenes to achieve a rescue.
Outlook
Prime Minister Andy Burnham advised that he wanted his government to support the UK high street, announcing a £210 million regeneration package. However, any hopes that the sector had of active support were rather dashed by the Chancellor when he gave his budget with the focus appearing to be on pub and other leisure operators.
Practically speaking this means that high street retailers – and management teams – will have to continue to navigate these challenging economic head winds for some time to come. Inevitably, some will fare better than others. The good news is that the overall number of retail insolvencies in 2026 is down when compared to 2025, but – like most years – Christmas trading is going to be critically important to any retailers’ success in 2027.
In the UK we are fortunate to have a flexible restructuring tool kit (e.g. administration, CVAs, pre-packs, restructuring plans) but there are also other “self-help” remedies available such lease re-gears and working in close partnership with direct landlords.
Brodies' restructuring and insolvency team advises directors, lenders, landlords, investors and businesses across the UK on restructuring plans, administrations, CVAs and business recovery strategies.
If you would benefit from a discussion, please do reach out.
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