New Begbies Traynor red flag report shows fashion and retail struggling
The latest ‘red flag’ report from insolvency specialist Begbies Traynor shows that retailers, and especially fashion stores, continue to suffer as coronavirus cases rise in the UK.
On Thursday the company said that over half a million UK businesses in total were in “significant distress” in the third quarter, which is a 6% increase compare to the second quarter. And 9% more businesses were in that state overall since the March lockdown.
It added that “retail continues to be hit hard”. The entire industry saw a 9% increase in distressed companies since the start of lockdown with 32,495 in Q1 and 35,448 by Q3.
But it said “there was another story to be told with regard to online, fashion and high street retailers. Since the start of lockdown there has been an 11% increase in online retailers in distress”, despite the accelerated move to online as a result of the pandemic. That means the 9,374 that suffered in Q1 rising to 10,433 by Q3.
And 8% more fashion retailers were in trouble vs the start of lockdown, the figure rising to 3,783 in Q3. There were also significantly larger numbers of high street retailers struggling with a 7% rise to 19,718 in Q3.
Julie Palmer, Partner at Begbies Traynor, said: “It is noteworthy that the number of businesses in significant distress have grown substantially in the last three months. With so many businesses limping along there could be a flood of insolvencies when the courts get back to anywhere near normal capacity and attempt to clear the backlog of pending cases. This in itself, combined with the end of the furlough scheme and other government support measures, is likely to have a material impact on the UK business failure rate.
“Unfortunately for the many zombie companies in existence across the UK, a perfect storm is on the horizon. A combination of a grim economic backdrop and very poor trading conditions, particularly in the most vulnerable sectors, will take its toll and this is expected to feed through to Q1 2021 when the government ends its high-profile corporate life-support measures.”
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