Published on 4 - August - 2011
Insolvency fears highest in retail sectorEight percent of retailers fear they will become insolvent in the next year, compared with a cross-sector average of 2%, says insolvency trade body R3.
The firm's latest figures show that 58% of retailers are experiencing a decrease in profit, which is 24% higher than the cross-sector average. Almost half of retailers have suffered a fall in sales volumes, while a third have seen a fall in market share.
A quarter of retailers say they are having cash flow difficulties, 9% more than the cross-sector average.
R3 president Frances Coulson said: "The pressure on retailers is two-fold. As consumers have less money to spend, stores are discounting their prices to get people through their door; this is at a time when inflation and rising commodity prices have increased retailers' costs. Given the nature of the retail business, it is extremely worrying that one in four are experiencing cash flow difficulties. This suggests that many are holding a large amount of stock or have slow-moving stock."
Retail is one of the sectors in which R3 members have reported the highest increase in new insolvency cases, including high-profile cases like Habitat and TJ Hughes.
However, the only sign of distress which is lower in the retail sector than the cross-sector average is the number of redundancies. Just 8% of retailers are making redundancies, against a cross-sector average of 13%.
But, 17% of retailers have seen key personnel leave, compared with a cross-sector average of 9%.
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