The number of UK retailers on the brink of collapse has risen by a quarter in recent months, a new report has warned.
The pressure on the retail sector follows new data showing that the number of people heading to stores during the Boxing Day sales has fallen.
The latest Red Flag Alert report from insolvency specialist Begbies Traynor shows that 2,124 UK retailers were in critical financial distress between October and December 16.
This was 25% higher than in the previous three months, between July and September, although there was a slight decline of almost 1% compared to the same period a year ago.
The latest figures include a 29% quarter-on-quarter increase in the number of general retailers on the brink of collapse, and a 17% increase among food and drug retailers.
Online retailers, takeaway stores, mobile food stalls and convenience stores were among the businesses that struggled the most.
Julie Palmer, partner at Begbies Traynor, said: “This year has highlighted the resilience and adaptability of some UK retailers, but the sector remains under significant pressure.
“It is clear that some retailers have found ways to manage financial pressures effectively, but others, particularly in general retail, are struggling under the weight of rising operational costs and depressed consumer spending.”
The Begbies report comes after data from MRI Software showed that the number of shoppers on Boxing Day across all UK shopping destinations fell by 7.6% compared to last year.
However, the company said this largely reflected a shift to online shopping, with analysts expecting consumers to do the majority of their sales online this year.
Clothing and footwear retailers had a weaker November than previous years, with sales volumes down 2.6% this month, according to the latest official figures.
Homebase was among a number of household names to announce it had brought in administrators last month after being hit hard by an “incredibly challenging” three years for the DIY sector.
Ms Palmer said this poorer performance in “traditionally a crucial month for the sector, further underlines difficult trading conditions as consumers delay purchases due to low confidence and rising prices”.
“To add to this uncertainty, the measures announced in the autumn budget, including the planned increase in employers’ national insurance contributions, will significantly increase the challenges these businesses face,” she added.
“These changes, in addition to increases in the minimum wage, will have a negative impact on cash flow and therefore we expect a higher number of insolvencies in this sector in 2025.”
Ms Palmer said the marginal year-on-year decline in the number of retailers in critical need provided a “glimpse of home”, with some businesses finding ways to adapt to financial pressures and changing shopping behaviour.
But she said others are “more vulnerable” to online competitors such as Temu and Shein, which have attracted a large number of shoppers attracted to cheap fast-fashion.
Meanwhile, a total of 28,747 retail businesses in Britain were also in significant financial difficulty last quarter, down from 34,494 in the same period last year.
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