Thousands of retailers are at risk of collapse as a lethal cocktail of lacklustre Christmas trading, prolonged discounting, higher staff costs and the pound’s weakness threaten to push firms to “breaking point”.
Research from insolvency specialist Begbies Traynor suggests that 21,802 retailers across the country are suffering from “significant financial distress”, 6 per cent higher than at the same stage last year.
Retailers will be pinning all their hopes on a last-minute sales surgeJulie Palmer
Julie Palmer, partner at Begbies, said: “Retailers were hopeful that 2016 would be a bumper year for Christmas sales, after reports that credit card debts hit a record high in October.
“But with rising transport and fuel costs continuing to drive up the cost of living and drag down consumer spending power, it seems that this momentum has not continued into the festive period, with levels of financial distress among retailers now even higher than last year.”
Research shows that 97 per cent of retailers in a state of financial distress are small and medium-sized businesses. Two high-profile chains – BHS and Austin Reed – collapsed this year, affecting thousands of workers.
“Prolonged discounting, minuscule margins and higher staff and input costs due to the new, higher national living wage and sterling’s weakness mean many retailers are being pushed to breaking point,” Begbies added.
The firm said that a key tipping point will come at the end of the month when retailers must pay a large quarterly rent bill to landlords.
Palmer said: “Small businesses, whose margins and cost bases are already stretched to the limit, are undoubtedly the biggest victims of the increasingly cut-throat UK retail environment, unable to compete on price or provide the convenience that savvy shoppers increasingly demand.
“With the sector’s quarterly rent day just around the corner, retailers across the country will be pinning all their hopes on a last-minute sales surge from shoppers who have left it too late for online deliveries, to help tip them over into the black.
“Unfortunately, without a strong end to 2016, I’m afraid many smaller retailers in particular may not survive much beyond the January sales.”