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Economy

Retail administrations increase in five-year-first

The number of retailers entering administration increased from 92 in 2016 to 118 in 2017, an increase of 28 percent, according to new analysis from Deloitte.

This is the first increase in the last five years, as those administrations with more than ten stores rose from 11 in 2016 to 17 in 2017.

Dan Butters, restructuring services partner at Deloitte, said: “We have seen a significant increase in retail insolvencies in the last twelve months including some well-known names.

“We see insolvencies in higher value categories, such as furniture, as a leading indicator that falling consumer confidence, and a drop in consumer spending, is starting to bite. This has implications for retail sub-sectors with a lower price point which typically take longer to feel the impact of reduced consumer spending.

“In January 2017 we highlighted five key cost pressures for retailers, namely the impact of the National Living Wage, Sterling devaluation, rates increases, commodity price increases and pension funding.

“These cost pressures will remain relevant for UK retailers as we move into 2018.

“Successful retailers over the coming months are likely to be those which have already proactively addressed the cost challenges alongside focused pricing and sourcing strategies to maximise margins.

“We also expect online retailers to continue to thrive, driven by two factors, their clear cost advantage against traditional physical retailers and the continued use of sophisticated data analytics to target consumers directly.”

Of the 118 retail administrations in 2017, 26 percent took place in London (31), with 22 percent in the North West (26) and 20 percent in the South East (23).

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