One quarter of Scottish shops could fold within the next year

One in four shops and almost one in five hotels across Scotland could go bust over the next year, according to one of the bleakest forecasts yet on the impact of weak consumer confidence and changing shopping habits.

Analysis by R3, the trade body for insolvency professionals, found that 274 retail businesses and 30 hotels had a high risk of going out of business within the next 12 months.

It said a further 1,238 retailers and 137 hoteliers are vulnerable to failure over the same period, which means that 26 per cent of retail businesses and 18 per cent of hotels in Scotland are at some risk of collapse.

Spokesman Iain Fraser said Scotland’s retail sector was suffering from both a lack of consumer confidence and “systemic changes” to the way in which people are shopping, which means those retailers who do not embrace new technology may not survive.

He said: “The shift to online purchasing is greatly affecting retailers, many of which have not effectively moved online. Whilst there will always remain high street retail outlets, their composition, offerings and delivery have changed dramatically over the last ten years and will continue to do so. Those retailers that do not respond to these changes will, unfortunately, cease to exist.”

The Scottish Chambers of Commerce said the figures were a stark illustration of the trends revealed in its recent quarterly business survey and highlighted the fragility of Scotland’s economic recovery.

Chief executive Liz Cameron said: “This is compounded by the recent bad weather and high strength of the pound against the euro, which are driving tourists to holiday destinations further afield.

“However, our own survey also indicated a deceleration in decline in these sectors. Government spending on infrastructure, for example, will drive jobs growth – this should have a positive impact on consumer confidence, which will benefit both the retail and tourism sectors.”

Separate figures released today by credit data company Experian showed 107 Scottish companies went bust in June, a decline of 6 per cent compared with the same month last year. For the UK as a whole, 1,650 businesses became insolvent last month, down from 1,783 in June 2011.

However, R3 said an economic recovery was some way off and retailers offering “niche or non-essential” products may have the most difficult prospects in the meantime.

The hotel sector remains particularly vulnerable and may struggle to fill rooms without slashing prices. According to accountancy firm PKF, revenues and occupancy rates at Edinburgh’s three- and four-star hotels fell for the third month in a row during May.

Occupancy fell 5.4 per cent and revenue was down 7.9 per cent, indicating continuing issues with the volume of tourists coming to the city, the firm said.

Fraser said: “Leisure travel can easily be curtailed and business travel remains subdued, therefore hotels face the difficult challenge of maintaining reasonable occupancy levels without simply heavily discounting rooms.

“Given that operational costs remain high this is a tricky balancing act facing many hotels and, unfortunately, given the high capital costs involved in the hotel sector, it is likely that many businesses will continue to go under until the market recovers.”