4,500 retailers in critical financial distress, new data reveals

Nearly 4,500 retailers are now in critical financial distress as poor consumer confidence, “sticky” inflation, and elevated interest rates force consumers to hold back from spending big, even in the run up to Christmas, according to new data from Begbies Traynor.

Following its findings, which analysed the first 10 weeks of Q4, the insolvency firm said the decision by many consumers to remain very prudent on household expenditure during the most important shopping weeks of the year only adds to the pressures faced by this embattled sector.  

Further evidence of the growing financial stress in the sector can be seen in the rapid quarter-on-quarter growth in the number of businesses in significant financial distress, up 7.5% on Q3, with 45,967 businesses now affected, according to the firm. 

Julie Palmer, partner at Begbies Traynor, said: “There is no doubt about it, the last 12 months have been incredibly difficult for British retailers as an increasingly tough economic backdrop continued to pile on the pressure, with businesses that were only just standing on two feet again now feeling the pain this Christmas. 

“And, after a year where consumers faced one of the worst cost-of-living squeezes on their wallets, the shopping bonanza many retailers were relying on this Christmas does not seem to have materialised, pushing many businesses close to financial ruin this winter.”

After the boom during the enforced lockdowns of the pandemic, the data also highlights the shift away from online only retailers as consumers return to bricks and mortar stores, favouring an omni-channel offer. 

In Q4, the number of online only businesses in critical financial distress leapt 11.7% to 910, representing over 20% of all the businesses in critical distress, while 7,393 online businesses were in significant distress, up 6.48% on the prior quarter.

Palmer said: “After years of being addicted to cheap money, many of these businesses must now grapple with increased costs and another minimum wage hike in April, while converting their stock into cash to avoid quarterly rent day turning into a fatal New Year hangover.

“On top of that, the situation is deteriorating for many consumers as energy bills and interest rates remain stubbornly high. It is likely this situation will only get worse when over 1.5 million UK households roll off cheap fixed rate mortgage deals in 2024.”

She added: “Ultimately, many of these businesses will have loaded up on debt during the good years and must now deal with the painful reality of higher interest rates at a time where demand is shrinking and margins are being eroded. So, plenty could fall victim to these pressures as the debt storm breaks across the country next year.”