North West high street see rise in businesses at risk

By December 1, 2017Client Articles, Featured, Finance, News

The number of North West retailers at elevated risk of financial failure has risen sharply in recent months, according to research by insolvency and restructuring trade body R3.

The figures show that the number of high street retailers in the region considered at higher than normal risk of failure in the next 12 months has increased from 23% in June to over 28% in November – equivalent to nearly 4,000 businesses in total.

Online retailers and catalogue companies in the North West have also been feeling the chill, with the number at greater than usual risk up from 27% to 29% during the same period – equivalent to over 1,300 firms.

The figures follow the latest statistics from the Office of National Statistics which show that year-on-year retail sales fell for the first time since 2013, with October sales figures 0.3% lower than in 2016. The British Retail Consortium also reported a decline in footfall in October, with the number of shoppers down by 2% year-on-year. Retailers will be hoping these indicators pick up as the festive shopping season gets underway.

Paul Barber, North West Chair of R3 and a partner at Begbies Traynor, comments: “The outlook for retailers is frostier than in recent years. With inflation eating into incomes, North West consumers are having to rein in their spending. At the same time, the pattern of spending is changing, with the growth in online sales, the Black Friday promotions, and shoppers choosing to spend more on ‘experiences’ such as eating out rather than buying products.

“While the North West stands to benefit from the rise in internet shopping, given that we are a world leader in e-commerce and catalogue stores, it is no easy option. These companies can face problems of their own including competition from overseas, distribution problems, and the need to keep up with fast-changing technology, and in fact their risk scores are higher than traditional stores.

“With the whole retail landscape shifting, both traditional and online businesses need to monitor their operations carefully and find ways to adapt to the changing trends.”

The R3 figures show that among the types of high street stores which it monitors in the North West, shoe shops are under the most pressure with 30% at greater than normal risk (up from 24% in June), followed by fashion stores at 29% and home furnishings shops at 28% (both up from 23% in June).

Bookshops are one of the lower-risk types of stores, with just 26% at greater than average danger of insolvency; however, with so many having closed their doors, only 78 such businesses remain in the whole of the North West.

The figures are from R3’s latest insolvency risk tracker. The tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.

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