Nearly 40,000 retailers in financial distress

With just two shopping days to go, and non-essential shops shut across large parts of the country, tough trading conditions have already hit the sector with a 24% leap in the number of struggling retailers in the final quarter of the year

Figures from Begbies Traynor for the period 1 October to 9 December show that nearly 40,000 (39,232) retailers – including both online and bricks and mortar stores – are now in ‘significant’ financial distress.

This marks an increase of 24% on the same period in 2019 and is up 11% on Q3 this year.

The data also indicates that over 20,000 high street retailers (up 22%) and over 11,500 online retailers (up 27%) are now in difficulty since the run up to Christmas 2019.

Julie Palmer, partner at Begbies Traynor, said: ‘Without doubt, this has been one of the toughest years ever experienced in the retail sector. While many industries have been hit hard, retail – which was already suffering a crisis of confidence – has been shaken to its foundations. 

‘High-profile administrations such as Arcadia Group and Debenhams not only threaten thousands of jobs, they also raise questions over the future of the high-street as we know it, and I expect there to be more as we enter the New Year.

‘That said, while Covid-19 has undoubtedly had a huge impact, the danger signs were there before the pandemic forced so many closures.

‘For example, Arcadia and Debenhams were both already struggling as they had failed to keep up with more dynamic competitors with a strong online offering.

‘However, simply being online is not automatically a “silver bullet” – as these figures show, securing market share online is wildly competitive and not everyone will succeed.’

Begbies Traynor’s research also shows the impact of the pandemic on the leisure sector, which would normally be seeing a raft of Christmas parties and other activities.

This has hit the hotels and accommodation industry the hardest, with over 7,500 now in significant distress, up 34% on the same time in 2019 and 20% since Q3 2020, while the number of struggling bars and  restaurants rose by 18% on Q4 2019 to nearly 21,000.

Palmer said: ‘While the summer and the Eat Out To Help Out scheme provided some respite, the return to partial lockdowns and the new tier-based model means, unfortunately, many businesses in this sector will struggle to survive.

‘Although there are increasing expectations that 2021 will bring more positivity, the effects of Covid-19 will continue to create a chill throughout the whole of the year and beyond, with it likely we are only seeing the tip of the iceberg for financial distress amongst businesses currently.

‘Both recent history and these figures show yet more high-profile retail and hospitality insolvencies are probable as a combination of onerous debt and the structural changes brought about by the coronavirus pandemic continues to take its toll.’

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