Critically distressed UK retailer numbers surge - report

By

Sandra Halliday

Published
December 27, 2024

Retailers continue to struggle and the number in critical financial distress was up 25% in the latest quarter compared to the three months before it, according to insolvency specialist Begbies Traynor.

In a report shared with City AM, it cited “weaker-than-expected” retail sales in November and Budget uncertainty.

Q3 had seen 1,696 retailers in critical financial distress but this jumped to 2,124 in Q4, it said. 

Despite heavy consumer spending, the fourth quarter is often a tough time for retailers as so much depends on it for overall annual profits. And the numbers for severely distressed retailers were similar (actually very slightly higher) this time last year.

That said, there was some better news slightly down the distress scale with retail businesses in the UK in “significant” (rather than critical) financial distress down to 28,747 from 34,494 a year ago.

Yet worryingly, the jump in general retailers in critical distress this time (+29%) was much bigger than those in the food and drug categories (+17%).

Begbies laid the blame for the problems this year at the door of seasonal issues, higher operating costs and consumer confidence being dented by the new government’s first Budget in late October.

And with planned increases to employers’ National Insurance contributions and an increase in the minimum wage, the pressure on businesses is likely to grow.

Julie Palmer, partner at Begbies Traynor, said the “the weaker-than-expected retail sales performance in November, traditionally a critical month for the sector, further underscores the tough trading conditions, as consumers hold off on purchases amid low confidence and rising prices.

“Adding to this uncertainty, the measures announced in the Autumn Budget…will significantly dial-up the challenges faced by these businesses.

“As we look ahead to 2025, the outlook is very mixed. While some retail businesses are adapting to these pressures, many others remain vulnerable, especially in the face of rising wages, online competition from the likes of Temu and Shein, and fragile consumer confidence… weaker businesses are likely to find little joy as we enter the New Year.”