Insolvency risk rises for North West retailers

The retail sector in the North West of England is facing tough times, as the proportion of outlets facing an increased insolvency risk has surged since June.

This heightened risk of financial failure is highlighted in figures from insolvency and trade body R3, which shows that the number of firms in a precarious position has increased from 23% six months ago to 28%.

It means around 4,000 retailers in the region have the threat of insolvency looming over them, while the number of online retailers and catalogue firms at risk has also risen.

Those deemed to be at above average risk increased by 2% to 29% overall, equating to a further 1,300 companies.

The proportion of shoe shops and fashion stores deemed to be at above-average insolvency risk both jumped by 6% between June and November, to 30% and 29% respectively.

Some 28% of home furnishing shops are in a similar position, up 5% from June and which is reflective of wider struggles in the industry.

Higher operational costs coupled with reduced consumer spending have hit firms hard – data form the Office for National Statistics show retail sales dipped in October, to be 0.3% lower than a year previously.

R3’s North West chair Paul Barber described the outlook for retail firms as ‘frostier than in recent years” before adding that many have reined in their spending as a result.

He also said that spending patterns are changing, with a focus more on experiences than on purchasing physical products.

Of particular concern in the North West is the situation surrounding catalogue stores, as increased competition from abroad, as well as logistics and distribution problems are taking their toll.

Given these issues, and the need for them to invest heavily in up-to-date technology, the levels of insolvency risk are greater than for other retail stores.

All of the data measures factors that point to the likelihood of business survival across the next 12 months, and R3 has warned that firms will need to carefully monitor their operations in the months ahead.

Those facing difficulties should seek advice on the restructuring methods that might be available to turn around their fortunes or on the various refinancing processes that exist to source funds.

By Phil Smith


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