The consultancy firm Begbies Traynor, an expert in corporate finance, has revealed that over 140 retail firms could go bankrupt during 2013, with over 13,000 more in a critical condition. There are several factors leading to this situation, but one of the biggest is the rise of online retailers and their continued popularity with shoppers.
Some retailers have been hit harder than others, with booksellers among the worst affected. However, the high street’s reliance on customers wanting to be able to see something before they buy it doesn’t seem to be able to beat the option of getting a product cheaper, especially in these financially difficult times.
There is also a big knock coming up in the first quarter of 2013, as partner at Begbies Traynor Julie Palmer points out: “with quarterly rent day landing on December 25 combined with fierce competition and significant margin pressure throughout the January sales period as consumer tighten their belts after Christmas, we could well see a surge of new insolvency activity during the first quarter of 2013.”
Many retailers had hoped for a big pickup on the approach to Christmas, but it has failed to materialise in the levels that they needed. This means that many shops are still struggling with losses incurred during 2012 that they may not be able to recover from.
Whilst the 140 expected to go into insolvency are an obvious concern, the 13,000 on a critical watchlist could be an even bigger problem. If the 140 go in the first quarter and the financial situation in the UK worsens, then those that are carefully balancing at the moment could fall like dominos, especially if the high risk climate prevents them getting the loans they need to grow.
It looks like it’s set to be a difficult 2013, and we may even see the GDP estimates revised down because of that. There’s little to celebrate this Christmas for some.