The owner of Southampton’s Westquay shopping centre has reported a loss in profits as a result of the ‘challenging’ conditions that the retail sector is facing.
Hammerson, the owner, made a loss in profit of £319.8 million in the first half of 2019, a huge drop in the £55.7 million the shopping centre made in the first half of 2018.
As well as Westquay, Hammerson owns 10 other centres across the country, including Birmingham’s Bullring, London’s Brent Cross and Bristol’s Cabot Circus.
According to the Hammerson, the main reason for the drop in profits was the result of many retailers going into administration or drawing up company voluntary agreements (CVAs), which allows a company to settle debts by paying only a portion of what it owes to creditors or find an alternative arrangement for the payment.
A total of 10 of its retailers either went into administration or cut their rent bills through CVAs, resulting in a £1.3m of a £5.5m annualised reduction in rental income.
The retailer said that with a softening of the ‘global backdrop’ and ‘continued Brexit uncertainty’, GDP rates are expected to weaken to 1.3 per cent in 2019 and 1.6 per cent in 2020. ‘However’,
However, a pick-up in wage growth and easing of inflationary pressures have seen household spending rise over the last six months and spending is expected to grow by 1.8 per cent in 2019 and 1.7 per cent in 2020.
Yet, these projections assume that the UK will sign a withdrawal agreement, Hammerson added.
Consumer confidence remains subdued as parliament struggles to decide on the country’s future relationship with the EU. Non-food retail continues to face price deflation alongside the impact of sterling weakness and increasing operating costs.
Yet, it maintained that the ‘largest single factor reducing income’ was tenant restructuring ‘in the form of CVAs and administrations’.