Over 5,000 retailers to fail
OVER 5,000 retailers are set to go out of business next year in further evidence of the embattled state of the high street.
The retail sector has already suffered from a steep decline in consumer confidence and rising unemployment is set to batter the industry further, according to figures out yesterday by accountants and business advisors BDO Stoy Hayward.
Lower wage growth and reduced consumer credit will also contribute to the increase in business failures, with 5,070 expected to topple next year, up from 4,630 expected in 2009.
However, a growing trend for bargain hunting and retailers slashing prices has helped retail spending throughout the downturn. Recent figures by the Office of National Statistics data shows that during the second quarter retail sales volumes were up by 0.7 per cent quarter-on-on quarter and up 1.3 per cent compared to the second quarter of 2008.
Despite this, many retailers have paid the price of heavy discounting, which has left profit margins painfully thin.
BDO Stoy Hayward retail business restructuring partner Tony Nygate, said: “Unemployment has risen less than the economic contraction originally suggested, with a flexible labour market allowing employers to reduce hours and wages rather than make redundancies.”
Nygate said: “However retailers can expect the worst of the recession to hit in 2010 when rising unemployment and structurally lower consumer credit will dampen prospects.”
The downturn has so far claimed several high–profile retail casualties, such as Woolworths and Zavvi, with many others toppling into administration.