Key events
Begbies Traynor also reports that an additional 28,747 retail businesses in the UK are in ‘significant’ financial distress – less severe than ‘critical’, but still concerning.
Begbies Traynor partner Julie Palmer says:
“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. With mounting challenges on the horizon, weaker businesses are likely to find little joy as we enter the New Year.”
More UK retailers fall into ‘critical financial distress’
The number of UK retailers facing “critical” financial problems has risen by more than 25% in the last three months, new data shows.
Highlighting the pressures on the sector, after a disappointing Boxing Day, restructuring specialist Begbies Traynor has reported there were 2,124 retailers in “critical financial distress” in the first 11 weeks of the October-December quarter.
That’s a jump from 1696 in July-September, but slightly lower than the 2,142 recorded in the last quarter of 2023.
Begbies, the UK’s largest insolvency practitioner, says the quarter-on-quarter increase reflects subdued consumer confidence and rising costs.
Julie Palmer, partner at Begbies Traynor, says retailers are under ongoing pressures, including rising operational costs and squeezed consumer spending.
Palmer adds:
“Moreover, 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, including the planned increase to employers’ National Insurance Contributions, will significantly dial-up the challenges faced by these businesses. These changes, alongside increases to the Minimum Wage, will negatively impact cash flow and, consequently, we expect elevated insolvency levels across this sector during 2025.
“Even for more resilient businesses, the pressures remain relentless, and many will likely face financial challenges next year as they navigate these compounded difficulties.
Introduction: Boxing Day footfall drops
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Cost-of-living pressures have been blamed for a drop in shoppers hitting the UK high street yesterday.
The traditional Boxing Day sales seem to have been something of a flop, with a 7.6% drop in footfall compared to 26th December 2023 as of 8pm last night, according to data from MRI Software.
Jenni Matthews, marketing and insights director at MRI Software, explains:
The decline in Boxing Day activity may reflect a shift in consumer behaviour, influenced by the ongoing cost-of-living crisis.
With footfall levels +18.1% higher in all UK retail destinations on Christmas Eve this year compared to Christmas Eve last year, suggesting that many shoppers concentrated much of their spending in a pre-Christmas rush.
There are other factors. For starters, online shopping means many retailers began their Boxing Day sales late on Christmas Day (handy for those sober enough to operate a computer or mobile phone).
Shoppers had been expected to spend £3.7bn on Boxing Day, only a 1.3% increase on last year.
Secondly, many stores remained closed on Boxing Day – including John Lewis, Marks & Spencer, Next and Aldi – to give their staff more of a Christmas break.
As Kien Tan, a senior retail adviser at PwC, puts it:
“The key thing about footfall numbers is that they don’t tell the whole story.
Lots of shops are now closed on Boxing Day. It used to be just John Lewis, but now Next, M&S and most big supermarkets close.”
Thirdly, rising concerns about Christmas consumerism may have encouraged some potential shoppers to stay at home.
Yesterday’s slump in the number of people tramping around the shops could show a return to the declining levels of excitement about Boxing Day that were recorded before the Covid-19 pandemic.
As Matthews explained to PA Media:
“We’ve got to bear in mind that (last year) was our first proper Christmas without any (Covid-19) restrictions or limitations.
“Figures have come out that things have stabilised, we’re almost back to what we saw pre-pandemic.”