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Insolvency figures show a worrying decline in retail health

03/08/2012

By Daniel Hunter

The latest statistics from the Insolvency Service show a dramatic increase in the number of retailers entering into administration in the second quarter of 2012, compared with the same period last year.

Retail trade, which covers shops, recorded an increase of 37%, with the number of retailers entering administration up from 38 appointments in Q2 2011, to 52 appointments in Q2 2012. This was a slight fall on the spike of appointments recorded last quarter for the sector (57).

“This figure is a damning indication of how retail health has declined over the last 12 months," Richard Fleming, UK Head of Restructuring at KPMG, commented.

"The sector remains under significant pressure from reduced consumer spending, rising overheads and all round low confidence.

“We have seen many retailers resort to slashing prices to try to encourage spending, but the long term effect of this discounting strategy will see them weakened even further. Price cutting may be a short term survival strategy, but it doesn’t tackle the underlying problems facing the sector.”

Key findings:

- Overall administration appointments were down 20% from Q1 2012 (779) to Q2 2012 (625). This quarter’s figures showed a 10% drop in comparison to the same period this time last year (695 for Q2 2011).

- The overall retail sector (including automotive and wholesale) saw a decrease of nearly 30% in administration appointments (95 for Q2 2012 to 135 for Q1 2012). However, year on year comparatives recorded an... continued on page two >

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