Increase in high street retailers in financial difficulty

Despite the tills ringing merrily over the run-up to Christmas, there has been a rise in the number of retailers facing critical financial problems, according to research from Begbies Traynor.

The firm's survey shows an 8% rise overall in retailers facing 'critical' difficulties compared to the same period last year, while the number of retail businesses with 'significant' financial issues is up by 15%.

While traditional high street stores are still being adversely affected by higher fixed costs from business rates and rental payments, Begbies Traynor says online start-ups are also starting to feel the pressure. Its research shows that 1,816 non-store firms are currently in 'significant' financial distress, a rise of 28% from the equivalent period last year.

Julie Palmer, Begbies Traynor partner, said: 'A flush of online start-ups, which are typically at higher risk of failure in the early stage of their life cycles, has driven a significant rise in financial problems in non-store retailers. Many of these are falling victim to larger online and multi-channel competitors who offer lower prices due to greater buying power, increased visibility from better search engine rankings, or the convenience of click-and-collect.'

Those most at risk are second hand stores and market stalls (29% rise in 'significant' distress rating) and food, drink and tobacco retailers (up 20%), along with electrical goods merchants (up 16%) and clothing and footwear retailers (up 12%).

In contrast, department stores which also have an online presence have done better, partly because consumers want to do all their Christmas shopping under one roof plus the convenience of what Begbies Traynor calls 'omni-channel retailing'.

Palmer warned there are likely to be more high profile retail failures at the start of 2014, stating: 'The approaching December quarter rent day will be an ongoing concern for many struggling retailers whose only source of income is through their bricks and mortar premises'.

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