Hong Kong’s struggling retail sector has reported the worst figures on record, with at least 5,600 job redundancies and 7,000 company closures expected in the coming six months, as the city feels the economic impact of half a year of political and social turmoil.
The grim statistics were released on Monday by the Hong Kong Retail Management Association which surveyed 176 businesses running 4,310 stores and employing 33 per cent of the sector’s workforce, between October 29 and November 22.
Association chairwoman Annie Tse Yau On-yee warned of a chain reaction that would further hurt an economy already in recession.
“This is the worst on record,” Tse said. “We don’t know when it will get to the bottom as it is uncertain when peace will be restored to society. Even if it stabilises, it will be a long road before Hong Kong rebuilds its international reputation and tourists return to the city.”
Hong Kong has been battered since June by protests sparked by the now-withdrawn extradition bill, with no end in sight.
The protests have evolved into a wider anti-government campaign, which has descended into violence and chaos, including the blocking of roads, transport and business disruptions, and the destruction of shops, restaurants and banks with mainland China connections.
The trouble has spilled into shopping malls and commercial, tourist and residential areas such as Causeway Bay, Tsim Sha Tsui, Yau Ma Tei, Mong Kok, Sha Tin and Tseung Kwan O.
Tourist arrivals, a key driver of consumption, plunged 43.7 per cent in October, the sharpest fall since May 2003, when the city was hit by the Severe acute respiratory syndrome (Sars) epidemic.
Tse noted that apparel, footwear, health and beauty, and jewellery retailers were hit hard.
In October, retail sales shrank 24.3 per cent year on year, the worst performance since government records started in January 1981.
The city is also caught in the crossfire of the US-China trade war.
About 30 per cent of the 176 companies covered in the survey said they would lay off 10 per cent of staff in the coming six months.
Tse said the companies planning lay-offs employed 21 per cent of the industry’s 270,000-strong work force, which meant more than 5,600 people would lose jobs. Those polled included companies running chain stores and individual small- and medium-sized enterprises (SMEs).
“This means more than 5,600 families will be affected,” she said. “When these families have lower or no income, their spending power will be hurt and their mortgage repayments will be affected, too.”
Some 97 per cent of the companies were losing money. About 11 per cent of those polled said they would fold their businesses in the coming six months. Tse said based on the 64,000 business registrations of retail firms in Hong Kong, at least 7,000 companies could be included.
She said a minority of retailers had managed to obtain rent cuts from landlords.
“Most landlords are still dragging their feet on lowering rents and of those who offer lower rents, the help is too little to make any difference,” she said.
Tse urged the government to “think out of the box” in speeding up the approval of its latest wave of relief measures announced last week, worth HK$4 billion.
In a related development, retired tycoon Li Ka-shing’s charity said on Monday it had completed distributing HK$1 billion to more than 28,000 SMEs in affected industries such as retail, tourism, and food and beverage, less than a month after it made the offer.
Tse said the industry’s priority was to cut costs even though some pro-business lawmakers had floated the idea of the government boosting consumption by issuing consumer coupons worth HK$10,000 to each Hong Kong resident.
“The key is having peace return to the city,” she said.
Iris Pang, ING’s economist for Greater China, said landlords, particularly those running malls, were unlikely to offer any significant rent reductions to avoid hurting the valuation of their properties.
“They may prefer to leave properties vacant rather than cutting rents,” she said.
When the retail sector could bounce back, Pang said, would depend on the extent and frequency of violence.
“The issues are that protests evolved into violence and roads are easily blocked by radicals without warning,” she said. “The unrest may last for years. Retailers should think about longer-term strategies.”
She said retailers in Causeway Bay, the site of clashes between radicals and police, could consider relocating to densely populated local communities.
For the full year, Pang expected Hong Kong retail sales would drop 20 per cent from 2018.
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