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Retail profit warnings hit seven-year high

Retail profit warnings rocketed to a seven-year high in the first three-months of the year, with businesses such as Debenhams and Mothercare posting plummeting sales.

Blaming a tough trading environment, market volatility and changing consumer behaviour, nearly one-fifth of listed retailers warned on profits in the first quarter, according to consultancy EY.

Company Voluntary Agreements and administrations also grew during the last year, with high profile fashion retailers New Look, Jaeger, Store 21, and East all entering either a CVA or administration during the last 12 months. Since April 2017, a total of 15 major retailers or restaurant groups have been impacted.

John Webber, head of business rates at commercial property agency Colliers International, who published the findings, said: “These figures are as bad, if not worse than the crash of 2008/9 when 16 companies went into administration- 12 in 2008 and 4 in 2009- and we are only in April now.”

Colliers blamed soaring business rates as a key factor, calling out the Chancellor for missing a trick in his spring budget by failing to tackle the issue of business rate reform, leaving many retailers “out to dry”.

Webber said: “Some businesses, particularly those in London saw massive rises in their rates liabilities in 2017, some of which they needed to pay last year, but with the second big uplift coming now in April, in addition to a 3% inflation rise, they are being knocked for six.”

Alongside business rates, higher debt levels (particularly from private-equity-backed businesses), and online competition has all impacted bricks and mortar stores in the retail sector.

Webber said: “Our figures do not even include all the small independent stores that have gone to the wall too. With big bills landing in April the situation is only going to get worse.”

“Reforming the business rates system won’t solve all the retailers’ problems, but at least it would be a start to show support - not another kick in the teeth for struggling businesses,” he added.

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