Almost 40,000 UK retailers in distress before tougher COVID-19 rules

According to new research from insolvency specialist Begbies Traynor, close to 40,000 UK retailers were in “significant financial distress” prior to the government introducing tougher COVID-19 restrictions at the weekend, making widespread administrations and insolvencies likely. At the weekend, new restrictions Tier 4 meant that all non-essential shops had to shut their doors.

The research found that 39,232 UK retailers, across both brick-and-mortar stores and online, were experiencing severe financial distress in the three months up to December 9. While the majority of distressed businesses were high street retailers, close to 11,500 online retailers were also found to be in financial distress.

The figures mean that financial distress was up 11 per cent compared to the previous three-month period and was up 24 per cent on the same period a year earlier.

Begbies Traynor partner Julie Palmer commented: “Without doubt this has been one of the toughest years ever experienced in the retail sector. While many industries have been hit hard, retail, which was already suffering a crisis of confidence, has been shaken to its foundations.”

“High-profile administrations such as Arcadia Group and Debenhams not only threaten thousands of jobs, they also raise questions over the future of the high street as we know it, and I expect there to be more as we enter the new year.”

The research also reflected the huge impact of COVID-19 restrictions on the hospitality industry, with more than 7,500 hospitality businesses in severe distress, up 20 per cent from the previous three months and 34 per cent from the same period last year.

With new restrictions impacting businesses like pubs and restaurants during what is traditionally one of their busiest periods, further widespread administrations in this sector appear certain.

Julie Palmer said: “The hospitality sector has been brought to its knees by the COVID-19 restrictions, with many operators either having to shut or completely change their business models to suit differing tier-based restrictions.”

“The Christmas and new year period is a crucial revenue driver for these businesses, which is why we’re seeing such significant increases in the numbers in distress this year.”

“For the hospitality sector, hopefully the easing of restrictions will give consumers confidence to return to bars and restaurants, and book breaks in hotels and other accommodation. For retail, some major modernisations and strong leadership will be crucial to entice shoppers back. Even retailers that have proven resilient will need to keep innovating.”

An additional source of concern for UK businesses will be the ongoing uncertainty surrounding Brexit and the growing likelihood the UK will leave the EU on January 1 2021 without a trade deal in place. With ever-more stringent COVID-19 restrictions, Brexit’s impact on the UK’s trade and travel with the EU could prove a significant driver of further distress.


View the latest distressed UK businesses here.

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