Unhappy new year in store for retailers, say experts

Picture: Jane Barlow
Picture: Jane Barlow
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BOOKSHOPS, chemists and off-licences are among 13,700 “zombie” businesses wracked by “significant” financial distress this Christmas, a new report claims.

The number of companies experiencing “significant” troubles has risen by 35 per cent in the past three months, even though most retailers will beexperiencing what should be their busiest time of the year, according to areport published today.

Almost 140 firms are in “critical”financial distress after a slow start to the Christmas shopping season, which is expected to trigger a wave of companies going bust early next year.

Julie Palmer, a partner at accountancy firm Begbies Traynor, which compiled the report, said: “Though the performance of national retailers is well documented, it represents just the tip of the iceberg with thousands of smaller and specialist retailers struggling to stay afloat in today’s austerity Britain.

“Whilst many of these zombie retailers may survive thanks to last-minute spending before Christmas, with the quarterly rent day landing on 25 December combined with fierce competition and significant margin pressure throughout the January sales period, we could well see a surge of new insolvency activity during the first quarter of 2013.

“A number of national or regional chains could fail in the next 12 months with a total of 140 companies already on our critical watch list, meaning they are unlikely to see the year out.”

Palmer blamed a trend for “showrooming”, where customers look at goods in high street shops but then use their smartphones or computers to find cheaper deals online for the same item.

She said bookshops had been particularly hard hit by the trend, with chemists and off-licences struggling against supermarket and department stores, because shoppers are cutting down on the number of journeys they make.

The report highlighted one bright spot, with depressed house prices continuing to mean that consumer cannot afford to move and so instead are spending money in DIY stores and furniture retailers to do up their homes.

Data released earlier this month by the Scottish Retail Consortium showed that like-for-like sales – which strip out the effect of stores opening – fell by 2.2 per cent during November, while the UK figure had risen, demonstrating a slow start to Christmas shopping north of the Border.

A report over the weekend from business monitoring firm Company Watch highlighted that credit insurers, lenders and suppliers will have “tough decisions” to make in the New Year over which retailers to continue supporting and which to let fold.

Britain’s financial crisis and ensuing double-dip recession have so far claimed the scalps of many well-known high street names, with electricals retailer Comet closing its doors last week to join a growing list of failures that has included Haddows – and Victoria Wine-owner First Quench, sporting goods retailer JJB Sports and high street stalwart Woolworths.

In contrast, chains such as Clinton Cards, Game and La Senza have been given fresh leases of life after beingrescued from administration.