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Number of retailers in 'significant' financial distress rises

Despite the boost to retail sales from Black Friday last month, new research has revealed that many retailers have struggled over the last three months.

GENERAL MERCHANDISE

Number of retailers in 'significant' financial distress rises

Despite the boost to retail sales from Black Friday last month, new research has revealed that many retailers have struggled over the last three months.

According to research by Begbies Traynor covering the period 1 October to 17 December, 24,251 retailers are now suffering ‘significant’ financial distress compared to 15,792 businesses at the same time last year.

Food and clothing retailers were two of the worst hit groups with the number of retailers experiencing ‘significant’ distress increasing by 70% and 123% respectively. Over the same period, levels of the more severe ‘critical’ distress decreased slightly by 10% from 150 retailers in fourth quarter of 2013 to 135 businesses this quarter, as the last minute shopping rush before Christmas artificially boosted sales.

Julie Palmer, partner and retail expert at Begbies Traynor, said: “Black Friday was lauded as the biggest day of retail sales this year, but it seems the only real winners were the largest online retailers and big brand high street chains with the biggest discounts and best online offerings, such as Amazon and John Lewis.

“In a bid to compete, the rest of the UK retail industry has been forced to slash prices and profit margins, but unfortunately sales volumes have failed to keep pace as Christmas shoppers across the UK have been particularly thrifty this year, taking advantage of the significant discounts on offer.

“With rates of inflation at a 12 year low, recent significant oil price drops, real incomes improving and confidence growing, consumers’ discretionary spending power should be set to rally. However, the extra spending power hasn’t translated into improved conditions in the retail sector, indicating a ‘new normal’ where consumers will only part with their hard earned cash for significant discounts.”

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