Retail Insolvencies

Insolvencies across the retail sector decreased by 14% year on year during Q3, suggesting the sector is improving. However, insolvencies across all sectors decreased by 23% year on year during Q3, suggesting that Retail is not bouncing back as quickly as other sectors.

With VAT set to rise to 20% on 4 January 2011, there is growing concern from a variety of commentators that the retail sector is set to suffer a wave of administrations, closures and job losses early in the New Year.

Many retailers have introduced pre-Christmas promotions and discounts earlier than normal in an attempt to drive sales. A leading consumer research group (Nielsen) has disclosed that Christmas puddings were on promotion in September, two months earlier than 2009. In addition, the British Retail Consortium recently revealed that consumer confidence is falling due to forecast job losses in the public sector.

Anticipating that the New Year could be one of the most difficult in living memory for retailers, one of the UK’s leading business recovery firms, RSM Tenon, has launched a free helpline for retailers. The 'Retail Survival Service' aims to help worried retailers weather the storm through Q1 2011. “Larger retailers will have factored the rise in VAT into their forecasts and prepared for it as best they can. The sector has been hit hard over the last few years and businesses recognise that they should start sales earlier. There is a ‘Feast and Famine’ effect. Retailers want to capitalise on the Christmas period as they know that everyone traditionally spends at Christmas time and tightens their belts in January.

With the increase in VAT to hit early next year as well, there will be more tightening of belts than before. Q1 2011 will be a particularly hard time for retailers, hence the reason for our free service. “Retail is a crucial sector in the UK economy and has led the country out of recession in the past while playing a key role in the regeneration of towns and cities. We need to ensure retailers are fit to deal with the next few months when spending is going to contract, and costs remain static or even rise.