Economists predict further retail insolvencies

A total of 2,600 shops and stores fell into insolvency in 2018, following 1,400 closures in 2017. The number of business failures of large retailers also rose -- particularly in the textiles and footwear segment due to unseasonal weather conditions, poor buying patterns and increased import costs, according to a report from trade credit insurer, Atradius. It forecasts a further increase in retail insolvencies of 5% this year alongside a deeper deterioration in profits. The current gloomy climate for retail has led experts at Atradius to downgrade its performance outlook of the sector from ‘fair’ to ‘poor’.

Head of underwriting for Atradius UK, Simon Rockett said the sector has several factors working against it, including high economic uncertainty, lower-than-expected GDP growth, a fall in consumer confidence and low sentiment. “Uncertainty linked mainly to Brexit has hampered consumer spending as well as slowing business investment, creating tougher trading conditions. The subsequent slump in sales and postponement of investment decisions has ramifications for large and small retail businesses alike; the industry is undergoing a period of correction and those who fail to adapt will face serious trouble,” he said.

Analysing retail subsectors, the ‘Atradius Market Monitor’ suggests that while sales of household appliances have so far shown some resilience, furniture retail has been impacted by lower demand and higher input prices due to a weaker sterling, as furniture heavily relies on raw material imports. In the consumer electronics segment, low levels of innovation and longer product life cycles have led to difficult market conditions whilst changes in consumer buying patterns mean that retailers are under pressure to adapt their offering.

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