Clothing & ShoesEconomy

Insolvency cracks showing with one in five fashion retailers

Some 19% of UK clothing retailers are currently exhibiting early warning signs that they are at risk of going insolvent, according to research by accountancy firm Moore Stephens.

Out of 35,078 fashion retailers analysed, 6,580 are showing early signs of financial distress, which can include a large fall in revenue and poor payment history.

Falling consumer spending and increased payroll costs have added to the pressure fashion retailers have felt from the increased success of online retailers.

Consumer spending was at its lowest level for five years in 2017, with online spending making up a greater proportion than ever before.

Rising business rates has meant many fashion retailers have increased prices or lowered profit margins to meet these costs. This has been worsened by an increase in staff costs after the introduction of the National Living Wage.

Last month, East was the latest fashion retailer to enter insolvency, following on from Jaeger and Store Twenty One in the past 12 months.

Over the last month, Debenhams was forced to issue a profits warning after poor Christmas trading and House of Fraser has entered negotiations on store rents in an attempt to reduce its costs.

Jeremy Willmont, head of restructuring and insolvency, said: “Clothing retailers have faced some of the most difficult trading conditions since the recession in the past year.

“The increasing popularity of online-only retailers, who have more manageable bills for business rates and lower payroll, means that many fashion retailers will need to improve their ‘bricks and clicks’ offering if they are to thrive.”

He added: “Businesses that are able to adapt to changing trends and preferences will put themselves in a much better position to not only avoid insolvency, but to flourish.”

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