Almost 40,000 retailers in UK in financial straits before tougher Covid rules

Almost 40,000 retailers in the UK were in “significant financial distress” even before the introduction of tighter restrictions over the weekend forced non-essential shops to shut.

Research by the insolvency specialist Begbies Traynor found that 39,232 retailers – both online and bricks and mortar operations – were experiencing severe financial problems in the three months to 9 December. This was up 11% on the previous three months and 24% higher than the same period a year earlier.

Julie Palmer, a partner at Begbies Traynor, said the retail sector had been shaken to its foundations and she expected more chains to follow Arcadia Group and Debenhams into administration. “Without doubt this has been one of the toughest years ever experienced in the retail sector,” she said.

The research found that while the worst of the problems have focused on the high street, almost 11,500 online-only retailers were also facing financial difficulties.

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.”

Pubs, restaurants and other hospitality businesses are also struggling to keep going through the rolling coronavirus lockdowns. The research found that more than 7,500 such businesses were in significant distress, a rise of 34% on this time last year and up 20% on the previous quarter of 2020.

“The hospitality sector has been brought to its knees by the Covid-19 restrictions, with many operators either having to shut or completely change their business models to suit differing tier-based restrictions,” Palmer said. “The Christmas and new year period is a crucial revenue driver for these businesses, which is why we’re seeing such significant increases in the numbers in distress this year.

“Looking to 2021, although there is a speck of light at the end of the tunnel with the vaccine now being rolled out, uncertainty remains, not just in terms of the post-Covid-19 picture, but how Brexit will impact – particularly on travel and trade with the EU.”

She added: “For the hospitality sector, hopefully the easing of restrictions will give consumers confidence to return to bars and restaurants, and book breaks in hotels and other accommodation. For retail, some major modernisations and strong leadership will be crucial to entice shoppers back. Even retailers that have proven resilient will need to keep innovating.”