- Begbies Traynor revealed 2,124 UK retailers were in ‘critical financial distress’
The number of UK retailers with ‘critical’ financial issues has surged following the latest Budget and sluggish sales, according to new figures.
Insolvency specialist Begbies Traynor revealed 2,124 UK retailers were in ‘critical financial distress’ between the start of October and 16 December, compared to 1,696 in the prior three months.
It said companies that provide retail sales via mail order, as well as takeaway food shops and mobile food stands were particularly affected.
Begbies suggested this reflected the ‘compounding pressures’ of seasonal demand, growing operational costs and consumer confidence sliding after the October Budget.
Chancellor Rachel Reeves declared that employers would pay a 15 per cent National Insurance rate on staff salaries exceeding £5,000 from April rather than the current 13.8 per cent levy on wages above £9,100.
She also said the National Living Wage would go up by 77p to £12.21 per hour, alongside increases in the capital gains tax rates on selling business assets.
Impact: The number of UK retailers with ‘critical’ financial issues has surged following the latest Budget, according to insolvency specialist Begbies Traynor
Many prominent retailers have warned the measures could force them to hike prices, reduce pay and jobs, or close down stores.
At the same time, the UK retail industry is experiencing subdued demand due largely to continued cost-of-living pressures.
The Office for National Statistics estimated retail sales fell by 0.7 per cent in October and only expanded by 0.2 per cent in the four weeks ending 23 November, instead of the 0.5 per cent forecast by analysts.
Nonetheless, Begbies found the number of UK retail businesses in ‘critical’ financial distress was marginally down year-on-year, while those in ‘significant’ distress were 17 per cent lower at 28,747.
Julie Palmer, partner at Begbies, remarked: ‘This year has highlighted the resilience and adaptability of some UK retailers, but the sector remains under significant strain.’
She added: ‘Clearly, some retailers have found ways to manage financial pressures effectively, but others, particularly in general retail, are struggling under the weight of rising operational costs and squeezed consumer spending.’
Palmer further said that the changes unveiled in the Budget will hurt cash flow and likely result in more retail firms becoming insolvent during 2025.
‘As we look ahead to 2025, the outlook is very mixed,’ she warned.
‘While some retail businesses are adapting to these pressures, many others remain vulnerable, especially in the face of rising wages, online competition from the likes of Temu and Shein, and fragile consumer confidence.
‘With mounting challenges on the horizon, weaker businesses are likely to find little joy as we enter the New Year.’
Begbies’ figures come a few days after revised ONS figures showed the UK economy flatlined between July and September.
The services sector recorded no growth over the period, while a bump in construction activity was offset by declining production output.
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