Nearly 36,000 UK retailers in ‘significant financial distress’

Begbies Traynor’s Red flag alert The report monitored the financial strain facing UK businesses based on County Court Judgments (CCJ) debt collection data over the past 15 years.

The quarterly report defines UK businesses as “significantly financially distressed” when they show “sustained or marked deterioration in working capital, contingent liabilities, retained earnings and net worth”, including up to 5 £000 in debt.

Businesses with more than £5,000 in debt are classed as ‘critically financially distressed’. Begbies Traynor found that the number of UK businesses in this category rose 37% year-on-year in the second quarter of 2022 to 1,957, including 118 retailers.

The number of retailers in critical financial distress showed the second highest increase – at 48% year-on-year – behind bars and restaurants, at 70%, and followed by the construction sector, at 36%.

Apparel retailers, in particular, “face a rapidly changing environment and must be prepared to adapt or could find themselves left behind,” said Julie Palmer, partner at Begbies Traynor.

Palmer told Drapers: “Warm weather and the holiday season mean many shoppers are updating their wardrobes, giving the sector a temporarily sunny disposition and a short-term boost.

“However, the structural changes in the way we work – we don’t need as many formal wear when many people are working from home in t-shirts and tracksuits – is a bigger issue. If we Add to this consumers becoming more aware of sustainability, responsible sourcing and manufacturing, as well as the fashion for pre-wear, it means there are long-term challenges for the industry, especially at the cheaper end of the market.

Sarah J. Greer