Retail experts at business advisory firm Quantuma estimate that corporate failures in the UK retail sector could spike by as much as 71% in 2023.
As reported by the Centre for Retail Research, in the first month of 2023 alone, seven UK retailers failed, affecting 361 stores and putting at risk 3,215 jobs.
Quantuma chief executive, Carl Jackson suggests retailers are facing another tough year, as the cost-of-living crisis continues to bite. Whilst consumers spent well over the Christmas period, it is estimated that disposable income is expected to fall for 70% of UK adults, reducing budgets for discretionary and obligatory purchases, which will inevitably lead consumers to trade-down, with mid-market discretionary items expected to be hit hardest.
Carl Jackson, Quantuma chief executive and retail sector restructuring expert said:
“As retailers look down the long road ahead to Black Friday and the festive trading period, most will have a series of critical questions they will need to address, in order to correctly position themselves and maximise sales during these key trading periods.
“Returns policies and working capital will be brought sharply into focus for online retailers.
“We have seen a large number of stakeholders seeking to reduce their exposure to the retail sector including trade credit insurers, lenders, high yield bonds and equity backers. We expect lending to retailers to contract, and where lending is feasible, pricing will be high.
“Reliance on overseas supply chains, particularly in the Far East and China, has exposed UK based retailers to substantial forex challenges, the impact of which has seen price hikes, as suppliers seek to pass on costs.
“With online giants Amazon, BooHoo and ASOS all suffering the impact of direct overheads in their business models and declining revenues as a result of the cost-of-living crisis, we expect to see Next and Fraser Group as the clear winners for the foreseeable future, as they accelerate their aggregator of online Intellectual Property strategies, as they strive to present real competition to Amazon and the online giants.”