Nearly 45,000 retailers ending the first quarter of 2018 in “significant” financial distress, new data has revealed.
Following a challenging first quarter for the high street, blighted by poor weather, declining footfall and high profile collapses, new research by insolvency firm Begbies Traynor revealed concerns from many retailers.
44,958 retailers were experiencing significant financial distress at the end of March 2018, an increase of 21% compared to the same period last year, according to the Red Flag Alert research, which monitors the financial health of UK companies.
In a breakdown of the data, food and drug retailers fared better than general retailers, with the number of businesses in the sector suffering significantly up by 11% to 12,290 in the past 12 months.
General retailers were heavily affected by unfavourable conditions on the high street, as 25% more business – 30,668 in total – said they felt significant distress.
Figures show that customer discretionary spending continued to fall, with its worst quarterly performance for more than five years [Visa UK consumer spending Index, April 2018], while high street footfall decreased by 8.6% in March alone [British Retail Consortium].
Poor weather conditions, increased wages, rising business rates and falling consumer spending all hit retailer badly in the quarter, said Julie Palmer at Begbies Traynor.
“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,” said the company partner and retail specialist.
“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.
“With competition on the high street fiercer than ever and sales volumes expected to be flat at best this year, those retailers with sophisticated delivery options and a strong multi-channel offering are likely to come out on top. At the same time, any businesses who are still playing catch-up on the technology front, or have failed to grow their customer base or invest in modernising legacy systems, are only going to lag further behind the pack.
“However, there is a glimmer of hope on the horizon for the UK’s consumer-facing industries who have weathered the storm thus far. With inflation falling back, lower unemployment and real wage growth finally returning, we should hopefully see households start spending again as the weather improves.”