Thousands of small to medium-sized retailers face a financial disaster in 2017, a new report has warned.
Through a combination of lukewarm Christmas trading, weakened sterling, higher staff costs and heavy discounting, the number of retailers in financial distress in the lead-up to Christmas has increased by six per cent compared to the same period last year, according to the report by business recovery firm Begbies Traynor.
The report added that of the 21,802 businesses facing this financial predicament, 97 per cent are small and medium-sized retailers.
Begbies Traynor also said it could get worse, with large quarterly rent bills due early in the new year.
“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,” Begbies Traynor partner Julie Palmer said.
READ MORE: Consumer confidence edges up, but still limps home to round out 2016
“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.”
Palmer added that small businesses were “undoubtedly” the biggest victims of the UK‘s competitive retail environment, as they were unable to compete on price or meet increasing shoppers‘ demands.
“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,” she said.
“Unfortunately, without a strong end to 2016, I‘m afraid many smaller retailers in particular may not survive much beyond the January sales.”
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