Thousands of retailers in “significant financial distress” this winter

The number of traders in financial difficulty increased by 2% at the end of 2021, according to a new study. Inflation and supply chain challenges mean it could get worse in the coming months.

The withdrawal of the UK government’s coronavirus support programs before a difficult financial winter has pushed many retailers to the brink of collapse. According to a new study by Begbies Traynor, in the last quarter of 2021, 35,775 retailers – including online stores and convenience stores – were now in “significant financial distress”.

The past two years have been difficult for traders, with measures to limit the spread of the coronavirus having reduced footfall in 2020 in physical stores in particular. However, as retailers sought to recoup their losses in 2021, the supply chain mismatch remaining from the initial outbreak prevented them from taking advantage of the traditional year-end rush to the extent that they had it. hoped for. For example, the total number of promotions to engage consumers on Black Friday weekend was lower in 2021 than in 2020, as was the depth of the promotions. Only 35% of retailers offered promotions of 50% or more, up from 43% in 2020.

Begbies Traynor found that the number of retailers in acute distress in the last three months of last year was lower than in the same period in 2020, but this was a 2% increase from the third quarter of 2021, as inflation and supply issues continued to weigh in. . The worst may yet be to come, due to the latest variant of Covid-19 as well.

Julie Palmer, Partner at Begbies Traynor, said: “2020 has been one of the toughest years in retail ever. And while many sectors have been hit hard, especially retail, they began to slowly recover in 2021 when restrictions were lifted and retailers and non-essential businesses were able to reopen. Omicron could be the straw that broke the camel’s back as many now face the prospect of trading during what is usually the leanest time of the year with the double whammy of falling trade and trading. very limited government support.

The number of corporate insolvencies observed in the UK was already on the rise at the end of last year, peaking at 26% in the third quarter of 2021. Other sectors have recently seen the UK government engage to provide further support amid this news and the new wave of Omicron is now hitting UK industry – however, retail has yet to take it into account. For example, Chancellor Rishi Sunak announced in December a £ 1 billion program for the hospitality and leisure sectors.

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