Fears grow for retail insolvencies in 2013

Consumer cutbacks and rising popularity of online retailers have prompted sharp rise in financially stricken firms, according to Begbies Traynor report

A tranche of retailers are at risk of going under in the new year after tough Christmas trading conditions have left nearly 140 firms in critical condition, a report warned on Monday.

Consumer cutbacks and the increasing popularity of online retailers have prompted a sharp rise in the number of firms in financial distress, according to research by business recovery group Begbies Traynor.

The study found almost 140 firms were in a critical condition in the fourth quarter, meaning they are on the brink of collapse, while more than 13,700 were in “significant” distress, up 35% during the three months to 17 December.

With quarterly rent payment due on Christmas Day, there are fears that many will be pushed into insolvency in 2013, following recent high-profile casualties Comet and JJB Sports.

Julie Palmer, partner at Begbies Traynor, said: “With quarterly rent day landing on December 25 combined with fierce competition and significant margin pressure throughout the January sales period as consumer tighten their belts after Christmas, we could well see a surge of new insolvency activity during the first quarter of 2013.”

Firms on the critical list include independent outlets, as well as major national and regional retail chains, Begbies added.

Book retailers are among those in significant distress, hit by competition from players such as Amazon, while convenience stores have suffered from the rising dominance of supermarkets.

The practice of so-called “showrooming” has also hit many bricks and mortar retailers, with consumers visiting high street stores to try a product before finding the best price online. But the trend for many homeowners to “improve, not move” has helped home decor and household goods retailers to buck the trend with a rise in corporate health in the fourth quarter, according to Begbies.

It said retailers selling furniture, lighting, home decorations, hardware and paints have seen a combined 13% fall in significant distress levels in the last three months.

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