The number of retailers and wholesalers falling into administration continued to decline in the final quarter of 2010, new figures show.

The Insolvency Service recorded 58 administrations of wholesale and retail companies in the fourth quarter of 2010.

That was a drop of 18% from the 71 sector failures in the previous three months – and down almost 40% on the 95 failures in the final quarter of 2009.

“The latest figures are encouraging and shows that the sector is moving in the right direction for now,” said Barry Knight, head of retail at Grant Thornton.

“But there is no room for complacency, as retailers will still face very difficult conditions in the year ahead, and this might be the lull before the storm.”

Knight warned that rising commodity prices, the increase in VAT and National Insurance contributions and low consumer confidence would take their toll.

“The retail sector will feel the pinch as customers with squeezed disposable income look to rein in their spending on non-essential purchases,” he said.

“It will be more crucial than ever to keep customers spending by offering quality products and services at a price point that ensures stock sell-through is in line with expectations and with emphasis on cash margin.”

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