Confidential Advice Line: 0800 063 9221

UK high street woes continue, with 43,000 retailers in financial distress

Business Health Statistics

| May 3rd 2018

More News by Julie Palmer

UK high street woes continue, with 43,000 retailers in financial distress

Corporate distress on the rise across all sectors that rely on consumer spending               

Following an extremely challenging first quarter for the UK high street, plagued by high profile administrations, unseasonably poor weather, declining footfall and weak consumer spending, new research from Begbies Traynor, the UK’s leading independent insolvency firm, reveals that nearly 43,000 retailers ended the period in a state of ‘Significant’ financial distress.

According to Begbies Traynor’s Red Flag Alert research for Q1 2018, which monitors the financial health of UK companies, 42,958 retailers were experiencing ‘Significant’ financial distress at the end of March 2018, up 21% compared to the same period last year (Q1 2017: 35,555).

Of these businesses, General Retailers saw the largest increase in distress (up 25% year on year) with 30,668 companies ending the quarter in ‘Significant’ financial distress, as consumer discretionary spending continued to fall - experiencing its worst quarterly performance since Q4 20121 - while high street footfall decreased by 8.6% in March alone2, as considerable levels of snowfall kept many would-be shoppers at home.

In contrast, the UK’s Food and Drug Retailers, whose products are more widely regarded as essential purchases by most households and are therefore less weather-dependent, saw a less marked deterioration in their corporate health over the period, with 12,290 businesses in ‘Significant’ distress; up just 11% over the past 12 months.

However, it is not only the retail sector that is showing worrying signs of stress. According to the data, all sectors of the economy which are reliant on consumer spending experienced an increase in financial distress over the period, as consumers continued to cut back on non-essential spending.

Excluding Retail, the Bars & Restaurants sector had the most companies in ‘Significant’ financial distress (up 9%, to 16,640 firms), followed by Leisure and Cultural Activities (up 34% to 12,143 businesses), Hotels & Accommodation (up 13% to 4,947 companies) and Travel & Tourism (up 25% to 3,722 businesses in distress).

According to Begbies Traynor, considerable overcapacity within these consumer-facing industries has forced many businesses to implement aggressive pricing models in order to retain customers, while margins continue to be squeezed by higher costs associated with the National Living Wage and Apprenticeship Levy.

Julie Palmer, Partner and retail expert at Begbies Traynor, said:

“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.

“Almost weekly we hear news of another major retailer that is struggling - from the recent administrations of Maplin and Toy ’R’ Us, to Carpetright’s closure of a quarter of its stores and the recent CVAs of New Look and Select - 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.”


About the author

Julie Palmer

Regional Managing Partner

Meet our Team of Experts

Julie is a law graduate who qualified with Price Waterhouse in 1994. Julie joined Smith & Williamson in 1997 and became a partner in 2001. With Mike Stevenson, Julie set up Middleton Partners offices in Salisbury and Southampton, both of which are now part of Begbies Traynor.

Julie is a member of the Insolvency Practitioners Association and is a Fellow of The Association of Business Recovery Professionals. Julie deals with all aspects of Corporate Recovery and turnaround work and takes all form of personal insolvency appointments.

53 Regional UK Offices

Find your local Begbies Traynor office and speak to an adviser today.

Find your Local Office
0800 063 9221

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0800 464 0871

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0161 837 1700

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
Gin festivals cancelled as organiser placed into administration
Begbies Traynor appointed as administrators of Gin Festival Limited
20 festivals planned for the coming months have been cancelled
Read More →
 
Join thousands of professionals by signing up for our updates
Analysis and Opinion from our Partners
Top Industry News
Register Now →
 

Advice you can trust

We are accredited by the following industry leading organisations

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland

Contact the Begbies Traynor team

or Find your Nearest Office

Here at Begbies Traynor Group we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY

Processing...