Over a quarter of the UK’s largest retailers are loss-making and are expected to be left in financial chaos following planned interest rates rises this year.
New research from financial analytics firm Company Watch, which predicted some of the largest retail downfalls over the last year, has placed nearly 400 retailers with total assets of over £5 million in its “warning area”.
Companies in this bracket are thought to be 25 times more likely to suffer financial distress than those outside it.
26.5 per cent (430) of the 1600 retailers featured in the study were found to already be loss-making, including: Hobbs, Mamas & Papas, Missguided, Thomas Pink, Sofa.com, TM Lewin, Paperchase, Sofology, Crew Clothing, Forever21 and Crocs.
This comes as speculation grows that the Bank of England could raise interest rates twice this year with the first expected in May.
If this happens, Company Watch expects the number of loss-making retailers to hit 492, representing 30.3 per cent of the UK’s largest retailers.
In contrast, the study also highlighted some of the most financially robust retailers in the UK according to its H-score measure. These included Next, Burberry, Fenwick and Moss Bros.
“It’s no secret that bank base rates are set to rise this year at least once and maybe twice,” Company Watch chief executive Jo Kettner said.
“For many of the household name retailers that are loss-making and already in our Warning Area, a rise in the cost of debt this year could well be the final straw.
“Retail suppliers and trade creditors are monitoring this situation closely and will be looking for signs that appropriate action is being taken by retailers to prepare for higher interest rates.”