Nearly 40,000 UK retailers were in “major financial distress” even before tighter restrictions were introduced over the weekend forcing unnecessary shops to close.
A study by bankruptcy expert Begbies Traynor found that 39,232 retailers – both online and bricks and mortar – experienced major financial difficulties in the three months to 9 December. This was up 11% on the previous three months and 24% higher than the same period a year earlier.
Julie Palmer, a partner at Begbies Traynor, said the sales division was shaken to its foundations and expected more chains to follow Arcadia Group and Debenhams in administration. “This is without a doubt one of the most difficult years ever in the sales sector,” she said.
The research found that while the worst of the problems have focused on the high street, nearly 11,500 online sellers alone were suffering from financial difficulties.
Palmer said: “While many businesses have been hit hard, sales, which were already in a crisis of confidence, have been shaken to its foundations. High-profile administrations such as Arcadia Group and Debenhams not only threaten thousands of jobs, they also raise questions about the future of the high street as we know it, and I expect there to be more when we enter the new year. ”
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Pubs, restaurants and other hospitality businesses are also struggling to keep going through the coronavirus lockouts. The research found that more than 7,500 such businesses were in deep distress, an increase of 34% on this time last year and up 20% on the previous quarter of 2020.
“The hosting sector has been brought to its knees by the limitations of Covid-19, with many operators having either closed or completely changed their business models to respond to various standards-based constraints,” Palmer said. “Christmas and New Year are a vital source of income for these businesses, which is why we are seeing such a huge increase in numbers in distress this year.
“Looking to 2021, although some light at the end of the tunnel with the vaccine has now been released, there is still uncertainty, not only about the post-Covid-19 picture, but how Brexit will affect – particularly on travel and trade with the EU. “
She said: “For the hospitality sector, we hope that the relaxation of the restrictions will encourage consumers to return to bars and restaurants, and book breaks in hotels and other accommodation. For sales, some key upgrades and strong leadership will be critical to attracting back customers. Even vendors who have been tough need to innovate. ”