Thousands of Retailers Ended First Quarter in ‘Significant’ Financial Distress

As many as almost 43,000 retailers around the UK ended the first quarter of this year in a state of “significant financial distress”, according to figures from the insolvency experts of Begbies Traynor.

The company’s Red Flag Alert research found that there was a 21 per cent increase in the number of retail businesses in significant financial distress between the end of March 2017 and the same point of this year.

A variety of factors are understood to have adversely affected retailer performance in recent months, not least weakened consumer spending, unseasonably bad weather and declining footfall at High Street stores throughout the country.

The problems currently being faced by retailers have seen a number of high profile businesses entered into administration in recent months, including Toys R Us and the electricals company Maplin.

Figures released recently by the British Retail Consortium (BRC) and KPMG suggest that sales levels across the UK’s retail sector as a whole fell by 3.1 per cent in April 2018, which represents the sharpest single-month decline recorded this century.

The BRC has said it expects to see the market environment for retailers “remain extremely challenging” in the coming months.

“The UK high street has been having a torrid time of late, with the Beast from the East, growing competition from online rivals, higher staff costs, rising business rates and declining consumer spending, pushing many retailers to the point of no return,” commented Julie Palmer from Begbies Traynor.

“Almost weekly we hear news of another major retailer that is struggling - indicating that even the most established brands are failing to entice customers through their doors.”

Ms Palmer did, however, note that there is potentially some cause for optimism for retailers who are able to stay in business and look to the future.

“There is a glimmer of hope on the horizon for the UK’s consumer-facing industries who have weathered the storm thus far,” she said.

“With inflation falling back, lower unemployment and real wage growth finally returning, we should hopefully see households start spending again as the weather improves.”