Commercial Awareness Update – W/C 8th March 2021

The round-up of the stories that a budding Student Lawyer should be aware of this week. Sign up here to get these updates in your inbox every week.

Can brick and mortar retailing make a comeback?

Article by Ben Pattinson (LPC student at BPP University)

Covid-19 has reduced footfall on the high-street and shopping centres to a minimum as consumers are trapped at home. The acquisition of TopShop by ASOS and Debenhams by Boohoo are clear examples of what a lack of footfall can do to high-street brands. It is clear that online retailing is increasing rapidly. Total online retail sales were 20% in January 2020 compared to 36% in January 2021. As more brands are taken online there will be fewer incentives to go shopping in person as shopping online is less time-consuming and  there are less options on the high-street. Overall, in the UK 16,000 shops have shut for good since the start of the pandemic.

What are retailers doing to attract consumers back to their stores?

However, IKEA has revealed plans to open 50 new stores in city centres instead of large out of town stores. If IKEA opens a store in a shopping centre they would be a great anchor tenant as they would attract more footfall to the area. Consequently, more shops will want to be in or within close proximity to the shopping centre as IKEA attracts more customers to the area. Additionally, John Lewis has announced that they will start to open mini John Lewis stores in their Waitrose shops. This will help attract customers to Waitrose stores as consumers can purchase their food as well as housewares, furniture and clothing in one place.

Many owners of shopping centres are coming up with other initiatives to gain value from their property such as turning their property into offices or building houses on the land. However, other landowners are developing ideas to help attract shoppers and give them a different shopping experience. For instance, Land Securities is turning an old Debenhams store in Wandsworth into an entertainment centre that will have bowling and indoor go-karting. Additionally, the BlueWater shopping centre will have a 700-meter zip wire and there are also plans for a bungee jump, giant swing and a skydive machine. Having both leisure and retail facilities will help attract the public as it gives shoppers a different experience.

Reliance on consumer behaviour:

Some companies are doing nothing and waiting for restriction to be lifted. Primark has resisted  going online as they believe that when restrictions are lifted shoppers will come flooding back. It is estimated that Primark will lose £1 billion by the time that they reopen their stores by staying shut. However, consumers will likely come back to the high-street, especially after spending months in lockdown. Also, the provision of leisure activities will attract more people because it will provide an alternative shopping experience that online retailers will never be able to provide.

It will be interesting to see when lockdown ends whether online services will continue to grow at the rate they have been in the last year or so, or whether bricks and mortar will make a competitive comeback. A lot depends on what retailers do to attract consumers away from their computers and also what consumer behaviour will be like after lockdown restrictions are lifted.

UK Company Listing Rules Set to be Overhauled

Article by Jamie Adair (1st year LLB student at Warwick University) 

A review of the City backed by the Treasury has proposed an overhaul of the company listing rules so that London can compete with rivals in New York and Europe more effectively. The review, led by Lord Hill, was published on Wednesday 3 March and put forward suggestions with the aim of closing the gap which has emerged between the UK and other financial centres post-Brexit and attracting tech companies to the London market. Amsterdam surpassed London as the top share trading centre in Europe in January which could be a sign that the City will lose more business due to Brexit in the coming months and years.

Under the current rules, the UK requires listed companies to have at least 25% of their shares in public hands whereas US rules set this minimum at 10%. Lord Hill’s review proposes a lowering of this limit to 15% so that companies won’t have to give up as much equity before being granted access to the stock market. The review also suggests allowing dual-class shares so that founders can retain more control of their companies. When multiple share classes are issued, one share class (offered to the public) has limited or no voting rights while the other share class (offered to founders, executives, and family) offers more voting power and often provides for majority control of the company. The current rules present significant obstacles to the London Stock Exchange in its efforts to attract fast-growth businesses  such as tech companies which have performed excellently throughout the pandemic.

Another key suggestion of the review is to help encourage Special Purpose Acquisition Companies (SPACs) to list in London. SPACs, also known as ‘blank check companies’ are publicly traded shell companies that are created for the purpose of acquiring or merging with an existing company. Through this process, the company being acquired by the SPAC can then have its shares traded on the stock market. As such, SPACs represent an alternative route to stock markets than the traditional Initial Public Offering (IPO), which is comparatively more costly and time-consuming. SPAC activity has boomed in recent years. Approximately 248 SPACs were listed in the US in 2020, raising more than $80 billion, compared to 59 listings raising approximately $13 billion in 2019. However, London has missed out on this wave that has swept through Wall Street and beyond. Lord Hill’s review therefore recommends a change to the rules by no longer suspending the share trading of SPACs after a target company is announced.

Should the proposals be adopted, the City may have a chance at regaining some of the business lost to rival financial hubs after Brexit.

You can read more about the story here, here, and here.