New research from Deloitte has indicated that retail administrations have increased for the first time in 5 years.
The research showed that:
- 118 retailers went into administration during 2017, up 28% from 92 in 2016
- There was a significant increase (55%) in the number of large retailers that have gone into administration
- Total administrations across all industry sectors (including retail) increased by 2% in 2017.
The number of retailers entering administration increased from 92 in 2016 to 118 in 2017, an increase of 28%, according to new analysis from Deloitte. This is the first increase in the last five years, and significantly records an uptick in the number of large multi-site retail administration appointments. Those administrations with more than ten stores rose from 11 in 2016 to 17 in 2017.
Dan Butters, restructuring services partner at Deloitte, said: “We have seen a significant increase in retail insolvencies in the last twelve months including some well-known names. We see insolvencies in higher value categories, such as furniture, as a leading indicator that falling consumer confidence, and a drop in consumer spending, is starting to bite. This has implications for retail sub-sectors with a lower price point which typically take longer to feel the impact of reduced consumer spending.”
“In January 2017 we highlighted five key cost pressures for retailers, namely the impact of the National Living Wage, Sterling devaluation, rates increases, commodity price increases and pension funding. These cost pressures will remain relevant for UK retailers as we move into 2018.
“Successful retailers over the coming months are likely to be those which have already proactively addressed the cost challenges alongside focused pricing and sourcing strategies to maximise margins. We also expect online retailers to continue to thrive, driven by two factors, their clear cost advantage against traditional physical retailers and the continued use of sophisticated data analytics to target consumers directly.”
Across all industry sectors, including retail, the total number of administrations in England and Wales increased by 2%, from 1,110 companies in 2016 to 1,134 last year. In addition to retail, three other sectors reported an increase in administrations between 2016 and 2017: wholesale and distribution (a 26% increase); recruitment and business services (16%) and printing and publishing (100%).
Regionally, more than a quarter of total administrations were based in London (303 appointments), albeit with appointments reduced by 3% relative to 2016. The North West remained the second-largest contributor to administration appointments in 2017 (243 appointments), also reporting the largest year-on-year increase in appointments (up 10%).
Of the 118 retail administrations in 2017, 26% took place in London (31), with 22% in the North West (26) and 20% in the South East (23).