The High Street in Transition: Which Insurance Covers Matter?

Coronavirus has tested the resolve of the UK’s high street, accelerating the demise of major names like Debenhams, Oasis and Brighthouse, and iconic British brands such as Laura Ashley and Cath Kidston. Experts predict a number of retailers, already struggling pre-Coronavirus, may go under, due to lack of buyers in the current environment.

High street sales are forecasted to fall by 70% during lockdown, according to Alvarez & Marsal, administrators for Cath Kidston. Rent and overheads still need paying and the 34 British retailers the administrators studied before lockdown already had negative cash flow, so more household names may disappear.

High streets suffered their worst month on record, in March 20203, leading Sophie Michael, Head of Distribution and Retail at accountancy and business advice firm BDO, to say “It is likely that the pandemic has only sped up the shift away from in-store shops as consumers become even more accustomed to buying online.”

According to The University of Salford Business School, “The underlying message is that a prolonged period of social distancing is going to bring changes, some permanent in the way we do all forms of commercial and social activities”, referencing a high-end US restaurant that has pivoted into drive-through and pop-up catering.

Online retail has boomed for some businesses, whilst local independent shops such as greengrocers, off licences and farm shops have attracted huge consumer support. A Barclaycard report on consumer spending trends says online spending rose by 5.5% and spending in specialist food and drinks stores by 30.5% in March. In-store sales for March 2020 were the worst on record, dropping by 34.1%, with shoppers abandoning the high street even before lockdown on March 23.

With trends, such as localism, more prominent and with many more people – especially the older generation – more confident about shopping online, many retailers may move to an online sales model. Reviewing insurance covers to ensure the right protection is in place and considering three key areas: supply chain, goods in transit and cyber protection – will be important.

Keeping the supply chain flowing typically depends on having cash within the business, requiring customers to pay on time. Considering Trade Credit insurance, which sees invoices paid when due, can ease non or late-payment pressures.

Online businesses run the risk of goods getting damaged, lost or stolen in transit. It is not just the large haulage and logistics companies that require good-in-transit cover but anyone operating courier-style deliveries.

And then there is the cyber risk. The efforts of hackers are constant and losing an online facility or experiencing a data breach that sees customers’ details accessed, can have major impacts, not just financially, through business rectification costs and possible GDPR fines and ransom payments, but also through reputational damage. Taking out Cyber Insurance can require a business to put certain security measures in place and is a wise purchase, particularly given the specialist IT and crisis support it can offer after an attack.

Determining required insurances is hard-to-do if you are a layman, whilst buying cover online may require you to suit tick-boxes that do not cover your circumstances. For those transitioning to new ways of doing business, having our broking support could be invaluable. If you are undergoing such a transition, having an early conversation about your insurance needs makes sense.