UK retail sector faces mounting pressures after Budget, warns Begbies Traynor
The number of UK retailers in critical financial distress has surged by more than 25 per cent quarter-on-quarter, as a firm singles out “weaker-than-expected” retail sales in November and Budget uncertainty.
According to data by insolvency firm Begbies Traynor, the number of UK retailers in critical financial distress surged to 2,124 for the fourth quarter of 2024, up from 1,696 in the previous.
Overall, this marked a slight year-on-year decline of less than one per cent from 2,142 in the fourth quarter 2023.
General retailers saw the sharpest quarter-on-quarter increase, up over 29 per cent, while food and drug retailers rose by just over 17 per cent.
The data stated that the businesses that provided retail sale via mail order, take-away food shops and mobile food stands were leading in increased critical financial distress.
Begbies pointed out that “this is likely to reflect the compounding pressures of seasonal demand, higher operational costs, and falling consumer confidence resulting from the Autumn Budget“.
The firm stated these results coincides with measures in the Budget, including planned increases to employers’ national insurance contributions and an increase in the minimum wage, all of which are expected to intensify pressure on businesses.
However, despite that, the data also noted that the total of retail businesses in the UK in ‘significant’ financial distress was 28,747, which was down in the Q4 2023 figure of 34,494.
Under significant strain
Julie Palmer, partner at Begbies Traynor stated that “this year has highlighted the resilience and adaptability of some UK retailers, but the sector remains under significant strain.”
She noted that “the weaker-than-expected retail sales performance in November, traditionally a critical month for the sector, further underscores the tough trading conditions, as consumers hold off on purchases amid low confidence and rising prices.”
“Adding to this uncertainty, the measures announced in the Autumn Budget…will significantly dial-up the challenges faced by these businesses.”
She warned that “as we look ahead to 2025, the outlook is very mixed.”
“While some retail businesses are adapting to these pressures, many others remain vulnerable, especially in the face of rising wages, online competition from the likes of Temu and Shein, and fragile consumer confidence, Palmer explained.
“With mounting challenges on the horizon, weaker businesses are likely to find little joy as we enter the New Year,” she added.
Despite Begbies predicting weaker-than-expected retail retail sales in November, the latest Office for National Statistics (ONS) showed retail sales were up 0.2 per cent last month, following a 0.7 per cent fall in October.