A new report reveals that the number of UK retailers teetering on the edge of collapse has surged by 25% in recent months, highlighting the ongoing financial strain within the sector.
The latest Red Flag Alert report from insolvency specialist Begbies Traynor shows that 2,124 UK retailers were in critical financial distress between October and December 16, marking a significant increase compared to the previous quarter.
While this represents a slight 1% decline from the same period last year, it underscores the sector’s vulnerability.
The report highlights a 29% rise in general retailers at risk of collapse, with food and drug retailers seeing a 17% increase. Online sellers, takeaway food businesses, and convenience stores were among the hardest hit.
Julie Palmer, partner at Begbies Traynor, attributed the challenges to rising operational costs and reduced consumer spending.
Despite some retailers managing financial pressures effectively, the retail sector remains under immense strain. “Many businesses, particularly in general retail, are struggling to adapt to the economic landscape,” Palmer stated.
The report coincides with new data revealing a 7.6% decline in Boxing Day shopper footfall, reflecting the ongoing shift toward online shopping.
In addition, clothing and footwear retailers reported a 2.6% decrease in sales volume for November compared to the previous year.
The challenges were exemplified by the recent collapse of Homebase, which entered administration after enduring an “incredibly challenging” period in the DIY sector.
The financial outlook remains bleak for UK retailers, with the upcoming national insurance contribution hikes and minimum wage increases set to exacerbate the financial pressure, potentially leading to a rise in insolvencies throughout 2025.
Despite some retailers finding ways to adapt to the new consumer behavior and financial pressures, many remain vulnerable to online competitors such as Temu and Shein, which continue to attract shoppers with low-cost, fast-fashion options.
The number of retail businesses in distress stands at 28,747, a decrease from 34,494 in the same quarter last year, but still reflects a significant portion of the sector in trouble.
