Thousands of retailers under 'significant financial distress' this winter
The number of retailers in financial distress rose by 2% at the end of 2021, according to a new study. Inflation and supply chain challenges mean this may become worse in the coming months.
The withdrawal of the UK Government’s coronavirus support schemes ahead of a tough financial winter has pushed many retailers to the brink of collapse. According to new research from Begbies Traynor, as of the last quarter of 2021, 35,775 retailers – including bother online and high street businesses – were now under “significant financial distress.”
The last two years have been tough for retailers, with measures to limit the spread of the coronavirus having reduced footfall in 2020 in physical stores in particular. However, as retailers sought to recoup losses in 2021, supply chain lag remaining from the initial outbreak meant they were unable to cash in on the traditional end-of-year rush to the extent they had hoped. For example, the overall number of promotions to engage consumers on Black Friday weekend were lower in 2021 than 2020, as well as the depth of promotions. Only 35% of retailers ran promotions of 50% or more compared to 43% in 2020.
Begbies Traynor found that the number of retailers in acute distress during the last three months of last year was lower than the same period in 2020, however it was a 2% increase against the third quarter of 2021, as inflation and supply issues continued to bite. Worse may still be to come, due to the newest variant of Covid-19, too.
Julie Palmer, partner at Begbies Traynor, said, “2020 was one of the toughest years ever experienced in the retail sector. And while many sectors were hit hard, especially retail, they began to slowly recover in 2021 when restrictions were lifted, and retailers and non-essential businesses were able to reopen. Omicron could be the straw that breaks the camel’s back as many now face the prospect of trading through what is typically the leanest part of the year with the double whammy of falling trade and very limited Government support.”
The number of corporate insolvencies seen across the UK was already on the rise late last year, with a 26% spike in the third quarter of 2021. Other sectors have recently seen the UK Government pledge fresh support amid this news, and the new wave of Omicron now hitting British industry – however retail has not yet factored into this. For example, Chancellor Rishi Sunak announced a £1 billion package for the hospitality and leisure sectors in December.
