With sales decimated by the coronavirus crisis, and with little support coming from landlords, some 20,400 Hong Kong retail stores will close by year end, according to research from the HKRMA.
A study conducted amongst 152 retailers ranging from SMEs through to large chains shows most retailers will have insufficient resources to survive beyond June, even after the first round of government support.
Respondents to the HKRMA (Hong Kong Retail Management Association) study collectively operate some 3350 stores and account for 23 per cent of the territory’s retail workforce.
So far this year, an estimated 5200 Hong Kong retail stores have closed permanently. With 62,400 retail stores still operating, the HKRMA predicts that a further 6600 stores will shutter between May and August, and another 8600 between September and December – totalling up to 20,400 stores by year-end, including those already closed since the crisis evolved.
Just half of the retailers responding to the survey said they had received rental relief from their landlords – but four in five had found the support to be inadequate with rent reductions of less than 50 per cent.
Meanwhile only 16.5 per cent of retailers had found the government grant to be useful in their aid, with the amount not sustainable for continued operations in addition to restrictions on how the funds could be used.
About 40 per cent of survey respondents said they can sustain their businesses for only four more months at most, and only 20 per cent of retailers for eight months.
Thousands to lose their jobs
Nine out of 10 retailers revealed a “severe to medium loss” in their business from the epidemic, more so than the initial impact from the social unrest in the past year. As the sector continues to struggle, two thirds of retailers had forced workers to take unpaid leave and the majority of the remainder had laid off workers or imposed pay reductions.
While the Hong Kong government has implemented a HK$80 billion plan to subsidise employers to pay workers 50 per cent of their salaries (capped at HK$9000 a month, or £930), in contrast, the UK government is offering a furlough scheme financing 80 per cent of workers’ wages (capped at £2500 per month) during government enforced lockdown periods.
The HKRMA calculates that 10,400 employees in the local retail sector lost their jobs in the past three months alone.
As the Hong Kong government prepares to launch a second round of pandemic-relief funds to businesses, the HKRMA warns that the amount of relief will be insufficient to cover the wages of all retail employees and lay-offs will continue.
With Hong Kong retail sales already plunging 44 per cent in February, the government subsidies have arrived too late, says the HKRMA, because retailers will be unable to continue trading through until the cash arrives in June.