// Over 20,000 high street retailers in significant financial distress for Q4
// “While many industries have been hit hard, retail – which was already suffering a crisis of confidence – has been shaken to its foundations” says Begbies Traynor
// Online retailers are also at risk, with 11,500 now in financial difficulty
Almost 40,000 retailers are under significant financial distress this Christmas, with new data showing the wide-ranging impact of coronavirus on both in-store and online businesses.
Research from insolvency firm Begbies Traynor found 39,232 retailers (including online and bricks and mortar stores) were in significant financial distress for the final quarter of 2020, from October 1 to December 9.
That figure represents a 24 per cent increase from the same period in 2019 and is up 11 per cent from the third quarter of 2020.
Over 20,000 high street retailers and 11,500 online retailers are now in difficulty, a rise of 22 per cent and 27 per cent respectively since the run up to Christmas 2019.
“Without doubt, this has been one of the toughest years ever experienced in the retail sector,” Begbies Traynor partner Julie Palmer said.
“While many industries have been hit hard, retail – which was already suffering a crisis of confidence – has been shaken to its foundations. High-profile administrations such as Arcadia Group and Debenhams not only threaten thousands of jobs, they also raise questions over the future of the high-street as we know it, and I expect there to be more as we enter the New Year.
“That said, while Covid-19 has undoubtedly had a huge impact, the danger signs were there before the pandemic forced so many closures. For example, Arcadia and Debenhams were both already struggling as they had failed to keep up with more dynamic competitors with a strong online offering. However, simply being online is not automatically a ‘silver bullet’ – as these figures show, securing market share online is wildly competitive and not everyone will succeed.”
Begbies Traynor defined ‘significant distress’ as those businesses with minor county court judgements (of less than £5000) filed against them or which have been identified by Red Flag Alert’s proprietary credit risk scoring system which screens companies for a sustained or marked deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.
Looking ahead, Palmer said that although a vaccine against coronavirus is “a speck of light at the end of the tunnel”, uncertainty for the industry is rife:
“Although there are increasing expectations that 2021 will bring more positivity, the effects of Covid-19 will continue to create a chill throughout the whole of the year and beyond, with it likely we are only seeing the tip of the iceberg for financial distress amongst businesses currently. Both recent history and these figures show yet more high profile retail and hospitality insolvencies are probable as a combination of onerous debt and the structural changes brought about by the Coronavirus pandemic continues to take its toll,” Palmer added.