R3 warns of retail sector distress

NEARLY ONE IN TEN retailers believes they will enter an insolvency process in the next year according to trade body R3.

The insolvency body found 8% of retailers are convinced they are likely to enter administration in the next 12 months, compared to an industry average of 2%.

Just 24% of respondents from retail and 22% from wholesale, said they had not experienced any signs of distress in the last year. Unsurprising as almost 60% said profits had decreased since 2010 compared to an average of 34% across all sectors.

R3 members have reported the highest increase in insolvency cases in this sector, including high profile closures such as Habitat, Focus DIY, Jane Norman and parent company of Moben Kitchens Homeform.

President of R3 Frances Coulson (pictured) said: “The pressure on retailers is two-fold. As consumers have less money to spend, stores are discounting their prices to get people through their doors; this is at a time when inflation and rising commodity prices have increased retailers costs.

“Unfortunately this year cash-strapped consumers are likely to hold off until the Christmas sales before making significant purchases thus putting further strain on retailers.”

More than 500 business-owners and finance directors from small medium and large organisations were surveyed.

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