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Retailers short of time to rescue festive trading performance

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In the final few trading days before Christmas, thousands of UK retailers continue to desperately slash prices in a bid to attract last minute shoppers through their doors, in the hope of turning around their fortunes ahead of the upcoming Quarterly Rent Day after yet another year of challenging festive trading for the sector.

According to new data from Begbies Traynor, the UK’s leading business recovery practice, UK retailers have experienced another weak festive trading period this year, with 21,802 retailers across the country now suffering from ‘significant’ financial distress; 6 per cent higher than at this stage last year (December 2015: 20,618).

Although a recent report from the Office for National Statistics shows that retail sales grew in November, today’s data suggests that this momentum may not have carried through into December. Begbies Traynor warns that, despite recent sales growth, prolonged discounting, minuscule margins and higher staff and input costs due to the new, higher national living wage and sterling’s weakness mean many retailers are being pushed to a festive trading breaking point.

Worryingly, the research also shows that of the 21,802 retailers currently in a state of ‘significant’ financial distress, 97 per cent (21,150) are small and medium sized businesses, indicating the challenges faced by smaller, independent retailers who lack the marketing budgets and economies of scale of their larger rivals.

Julie Palmer, partner and retail expert at Begbies Traynor, says, ‘Retailers were hopeful that 2016 would be a bumper year for festive trading, after reports that credit card debts hit a record high in October and household savings dipped to their lowest level since 2008, as consumers beat the Brexit blues through a spot of retail therapy.

‘But with rising transport and fuel costs continuing to drive up the cost of living and drag down consumer spending power, it seems that this momentum has not continued into the festive period, with levels of financial distress among retailers now even higher than last year.

‘After the largest high street and online retailers kicked off their festive discounting extra early this year, small businesses, whose margins and cost bases are already stretched to the limit, are undoubtedly the biggest victims of the increasingly cut-throat UK retail environment, unable to compete on price or provide the convenience that savvy shoppers increasingly demand.

‘With the sector’s Quarterly Rent Day just around the corner, retailers across the country will be pinning all their hopes on a last minute sales surge from shoppers who have left it too late for online deliveries, to help tip them over into the black. Unfortunately, without a strong end to 2016, I’m afraid many smaller retailers in particular may not survive much beyond the January sales.’

Paul

The author Paul