- Deloitte: 28% increase in retail administrations in 2017.
- Jaeger, Agent Provocateur, and Jones the Bootmaker among the chains that went bust last year.
- Rising inflation, pension funding, and the National Living Wage are all putting pressure on retailers.
LONDON – The number of shops going bust increased last year for the first time in five years, new data shows.
Deloitte said on Monday that 118 retailers went into administration last year, up from 92 in 2016.
The figures came as data from the British Retail Consortium (BRC) showed the biggest slump in non-food spending since 2009. Spending grew by 1.1% in the final three months of 2017, a big drop off from the year’s average growth of 1.7%.
The increase in administrations was driven by trouble for large retailers with a 55% rise in the number of large retailers – classed as any chain with more than 10 stores – going bust, according to Deloitte.
The 28% rise in retail administrations outpaced the cross-sector average, which saw a 2% rise in administrations last year.
Dan Butters, a restructuring services partner at Deloitte, said in a statement: “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.”
Inflation hit a high of 3% last year as a result of the collapse in the value of the pound after the 2016 Brexit vote. Higher prices for essentials like food and fuel has meant consumers have less discretionary cash to spend on things like fashion, furniture, and electronics.
Retail analyst Richard Hyman told Business Insider: “We have flat demand at best, increasing capacity (online is growing steadily) and rising costs. Retail is trying to manage costs down but this often focuses on people – it’s a high fixed cost business and difficult to cut anywhere else. Cutting people usually diminishes a retail business directly or indirectly.”
Butters said: “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.”
Deloitte’s figures come on the same day as a profit warning from Mothercare after tough Christmas trading. The update saw Mothercare’s share price plunge 25% at the open in London.
Debenhams was also forced to issue a recent profit warning as a result of poor Christmas trading and Retail Week reports that House of Fraser is seeking rent reductions from landlords to offset poor trading. All of this suggests that the retail sector will remain under pressure in 2018.
Hyman told BI: “Not only will it continue this year, but it will accelerate. All the headwinds gaining ground in 2017 will gain still more in 2018.”