Thousands of retailers will be pushed to “breaking point” in 2017 as they face a perfect storm of lacklustre Christmas trading, heavy discounting, higher staff costs and the weakness of sterling, research has shown.
The number of retailers in “significant” financial distress has increased by 6% on this time last year to 21,802, said the report by business recovery firm Begbies Traynor.
Almost all (97%) are small and medium-sized retailers.
Begbies Traynor warned the situation would come to a head at the turn of the year, when large quarterly rent bills are due.
Julie Palmer, partner at Begbies Traynor, said: “Retailers were hopeful that 2016 would be a bumper year for Christmas sales, after reports that credit card debts hit a record high in October.
“But with rising transport and fuel costs continuing to drive up the cost of living and drag down consumer spending power, it seems that this momentum has not continued into the festive period, with levels of financial distress among retailers now even higher than last year.
“Prolonged discounting, minuscule margins and higher staff and input costs as a result of the new, higher national living wage and sterling’s weakness mean many retailers are being pushed to breaking point.”
She added: “Small businesses, whose margins and cost bases are already stretched to the limit, are undoubtedly the biggest victims of the increasingly cut-throat UK retail environment, unable to compete on price or provide the convenience that savvy shoppers increasingly demand.
“With the sector’s quarterly rent day just around the corner, retailers across the country will be pinning all their hopes on a last-minute sales surge from shoppers who have left it too late for online deliveries to help tip them over into the black.
“Unfortunately, without a strong end to 2016, I’m afraid many smaller retailers in particular may not survive much beyond the January sales.”