Nearly 45,000 UK retailers in financial distress this Christmas

Nearly 45,000 retailers are in financial distress this Christmas as a snowy weekend and the squeeze on consumer spending power hit sales after the Black Friday rush.

While Toys R Us faces potential administration on Thursday if a deal cannot be struck with the pensions lifeboat, there has been a 22% increase in the number of retailers, nearly 8,000 more, facing “significant financial distress”, according to a survey by the advisory company Begbies Traynor.

The furniture chain Multiyork is being wound down after administrators were called in last month, while nearly 3,000 jobs have gone at the collapsed groceries wholesaler Palmer & Harvey.

Julie Palmer, a retail expert at Begbies Traynor, said retailers had faced a particularly disappointing few weeks of trading following the apparent success of Black Friday at the end of November.

“The increasingly frantic promotional and discounting activity we are seeing this week across the high street is simply not having the same effect on consumers as it once did,” she said.

“UK shoppers are savvier than ever and prepared to search online for the best deals, having grown wise to the gimmicks and discounts on offer in store, which many now realise may not be as good as they first appear.”

On Wednesday, with four shopping days until Christmas, high street stores are discounting heavily, including the majority of fashion retailers. H&M is offering up to 60% off, while Debenhams, House of Fraser, French Connection, Gap, New Look and Dorothy Perkins are offering up to 50% off.

Retailers are battling for business after a near 10% fall in the number of shoppers out on the high street in the first three weeks of December, according to the consultancy Ipsos Retail Performance. That was driven by a 21% drop on Sunday 10 December, when there was heavy snow across the UK.

Spending has risen by 3.1%, according to Mastercard, but online retailers are experiencing the best of this sales growth, with a 12% lift on last year. The card operator found spending on groceries had so far dipped by 0.1%, although supermarkets’ busiest day is expected to be Friday.

A CBI survey of 109 companies this month suggested that online sales on Black Friday and Cyber Monday were “unspectacular”.

Of those surveyed, 37% of retailers said sales volumes were up in the year to December, while 17% said they were down. The resulting balance of +20% was less than the +30% predicted by retailers, and weaker than +26% in November.

Alpesh Paleja, the CBI principal economist, said: “Notwithstanding the sales growth seen in the last couple of months, underlying trading conditions are tough for retailers. We expect the squeeze on real pay for households to last a while longer, so retailers will still face challenging conditions ahead.”

Clothing retailers had a difficult October and November, as sales of coats and knitwear were held back by unseasonably warm weather, while the slowdown in the housing market meant a tough time for DIY and furniture chains.

Palmer said: “I fear UK retailers are now in the midst of a perfect storm, with November’s interest rate decision, rising inflation, falling real wages, reduced credit availability and increasing Brexit uncertainty all combining to put unprecedented strain on household budgets this Christmas season, pushing consumer confidence to an all-time low.”