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More than half of UK etailers in 'financial distress'

The number of UK online retailers in financial distress has risen by 65% over the past three years to 9,024, insolvency firm Begbies Traynor has found. 

The number of retailers facing significant financial distress has increased by 1% to 26,930 during the three months to 19 December, compared with the same period last year. 

Significant distress among fashion retailers has risen 21% over the past three years, with 3,355 companies now affected.

Meanwhile, 97 general retailers are in currently in ”critical financial distress”, which Bregbies Traynor said is often a precursor to formal insolvency. 

“The year started with uncertainty for businesses with a decision on a Brexit deal and the nature of the UK’s exit from the European Union set to be determined”, Julie Palmer, partner at Begbies Traynor, said. 

“Consumer confidence has suffered and, as a consequence, it hasn’t just been retail businesses that have suffered. Yes, we have seen the collapse of the likes of Mothercare and Karen Millen, while Arcadia has forced through a CVA, but the downfall of Thomas Cook has truly shaken the high street.

“However, with the general election over and MP’s having passed the Government’s Brexit bill, businesses now have a degree of certainty enabling them to better plan for the future outside of the EU.

“Looking to 2020, it seems as if the accelerating numbers of online retailers in distress will continue. The competition online is ferocious, but the rewards for those that succeed – such as Boohoo – are huge. In the New Year, strong leadership will be key. There are some tough decisions to be made and some hefty modernisations to bring forward. Even retailers that are performing well will have to keep on their toes. As Ted Baker will attest, 12 months is an awfully long time in retail. In the coming months, many businesses will have to make a decision on whether to stick or twist with investment, innovation and expansion.”

Readers' comments (1)

  • Bricks and mortar retailers have dominated the narrative surrounding the challenges in fashion retail, as their iron grip on the market has been loosened, and their traditional monopoly over growth opportunities has diminished. We've heard endless groaning about the business rates burden borne by those with prime location property estates, and the purported advantages such affords the online sector.

    We've heard much less about the challenges facing the wider online retail market. That prime location is available at a discount on the virtual high street compared with the physical high street is an outright myth. Added to which, an additional class of digital landlord is even more deeply embedded in the revenue stream for pureplay online retailers. Meeting customer expectations on shipping and return logistics adds a chilling additional operational cost base to an already highly competitive market on product pricing.

    The troubles facing legacy industry giants like Arcadia, and the runaway success of online giants like Boohoo.com, frame the debate at the expense of a more nuanced understanding of what's happening in an increasingly complex and diverse sector.

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