Survival of M&S Banbury town centre store 'highly unlikely' says retail consultant

Consultant and retail analyst Ian Middleton - who is also a Green councillor on Cherwell District Council (but not speaking for the council) said it was no surprise that Marks and Spencer would concentrate its efforts on its new Banbury Gateway Retail Park store.

He was speaking in the light of news this week that M&S has put the Bridge Street store into a staff consultation over its closure proposals. Council leaders have said the Castle Quay unit will be 're-purposed' if the closure is confirmed in a few weeks' time.

Mr Middleton told the Banbury Guardian: "M&S have been struggling for some time now and are planning a whole raft of store closures. It's no surprise then that, whilst rationalising in an area where they have two large stores, they'd keep the brand new store at Gateway, where they've just invested a lot of money.

"Whilst this may not be a direct reflection on Banbury itself, if the Castle Quay store was reasonably profitable it wouldn't be on their closure list. Currently, they've only announced consultation with staff, but that is largely a formality. I think it highly unlikely that the store will continue to trade having got to this point.

"The high street has just suffered its worst Christmas trading period in living memory (and) I'd expect more store closures to come, some of which are operated by brands that trade in Castle Quay, whilst others may already be on reduced rents as a result of CVAs," he said.

"A CVA is a company voluntary arrangement, where a company in financial difficulty comes to an administered agreement with creditors rather than going into administration or liquidation. They often involve landlords agreeing to rent reductions or other additional terms on leases. An agreement has to be supported by a majority of creditors, which in the case of retailers can often mean landlords having to take a hit, even if they don't agree themselves. Debenhams launched a CVA last year as part of a restructuring plan. It was challenged in the high Court by several landlords but was still passed."

Mr Middleton said it was possible a tipping point may be reached where the Castle Quay centre became unviable.

"There could come a tipping point where this makes the centre unviable and it wouldn't be the first time. Some centres owned by some of the most experienced institutional retail landlords in the world have become 'Zombie Malls' ; essentially only operating to service ongoing debts and interest on loans. It's not really a great time for anyone to be investing heavily in retail property," he said.

"It's widely rumoured in the industry that Debenhams has also pressed all their landlords for rental reductions and I can't believe that Castle Quay is any different. If they also decide to cut and run, that will leave the centre with no anchor tenants. With the loss of BHS and now M&S, that may be an even more likely prospect.

"There are only so many levers that a local authority can pull in these cases, and when they're also wedded to a large and potentially toxic asset like this, the choices become even more limited, especially with respect to the rest of town outside the centre. Cherwell is already in the process of re-purposing the BHS unit into what amounts to an indoor market. How well that works out remains to be seen, but with that particular bolt already shot, it's not really a viable alternative for yet another huge area of once prime retail space.

"Much as I agree with the idea of local authorities working to revitalise local high streets, I remain concerned about councils like Cherwell taking on the liability for large assets like shopping centres, especially in an era of retail decline that's likely to continue for the foreseeable future.

"As both the landlord and the local authority, questions also need to be asked about how business rates liabilities play into this scenario. Ordinarily the council would collect void rates from the landlord, but as they are one and the same, they could potentially lose out at both ends of the equation. They will see a loss of business rates income, some of which they retain, whilst also being liable for that element that goes to central government," said Mr Middleton.

"The loss of so many local jobs is also a serious concern, not only for those unfortunates who will find themselves out of work, but also in terms of the impact on the local economy. Let's hope M&S manage to find alternative positions for as many of their colleagues as possible.

"But we also have to remember that Castle Quay and the new canal-side development are being underwritten with council tax payers money to the tune of tens of millions of pounds. If that gamble doesn't pay off, will we be looking at further cuts to services to plug the gaps in council finances that may result?"

Councillor Barry Wood, Leader of Cherwell District Council, commented: "Marks & Spencer has played an important role in the Castle Quay shopping centre, and we are pleased that their store at Banbury Gateway will remain open to serve the local community. Whilst we are sorry that Marks & Spencer may be leaving, the closure of the store presents an opportunity to re-purpose the space to continue to attract exciting new brands to Banbury for the community and visitors alike. Marks & Spencer are currently undergoing their employee consultation.

“We will now be working with a professional team on the future of the space, and will investigate a number of options for the repurposing of the store should the store close.

“The Castle Quay shopping centre continues to attract great brands and retailers are committed to their future within the shopping centre, as demonstrated by the upsizing of JD Sports and a number of stores renewing their leases in a commitment to the shopping centre.

“Since acquiring the shopping centre in January 2018, Cherwell District Council has set in motion plans to transform Castle Quay in line with its vision to create a leading retail and leisure destination for the whole town of Banbury for the benefit of residents and visitors in the years to come, with new initiatives such as Lock29 (due to open in the spring) and Castle Quay Waterfront. The shopping centre will continue to be upgraded and we look forward to this change in its future for the whole community".

Council sources indicated that they are in discussions with M&S about the future of the store.