New research from accountancy firm, Moore Stephens, has found that around 5,538 (18%) of clothing retailers in the UK are at particular risk of insolvency. Moore Stephens analysed the state of 30,940 businesses and found that the increase in business rates and the uncertainty surrounding Brexit negotiations is continuing to add pressure to businesses in the retail industry.
Alongside business rates and Brexit uncertainty, the introduction of the National Living Wage, a weakened pound and increased competition from online rivals have been held responsible for putting extra pressure on retail businesses with physical stores.
Head of restructuring and insolvency at Moore Stephens, Jeremy Willmont, said; “Clothing retailers are being buffeted hard on many fronts. Rising costs and intensifying competition are putting pressure on revenue and making profit margins harder to maintain. Sterling’s post-Brexit performance could have a chilling effect on discretionary spending on ‘fast fashion’ imported from overseas supply chains.”
Earlier this year, online clothing retailer Asos overtook High Street store Marks and Spencer in terms of market share. When they overtook them, it was described as a seminal moment for the UK retail sector as the technology focused firm leapfrogged a stalwart of the British High Street.
So as share prices have grown at online retailers like Asos and Boohoo, High Street cornerstones such as Marks and Spencer, John Lewis and Debenhams have all flat-lined at best. In the last couple of years, well-known names such as Jaeger, Austin Reed, Banana Republic, Jones The Bootmaker and Ben Sherman have all failed or entered into administration.
These names join the likes of BHS, Comet, Jessops and Jane Norman who have all fallen victim to a difficult and ever-changing retail market. All of the above took place only a couple of weeks before news that High Street accessories chain Claire’s Accessories was on the brink of collapse after running up £1.39bn in debt. A week later and historic menswear retailer, Greenwoods, who had been trading since 1860, entered administration putting more than 300 jobs at risk.
The administrations, the warnings and the dominance of online retailers show the clear risks that so many retail businesses with a physical presence are facing at the moment. As inflation rises, the pound weakens and Brexit negotiations become more uncertain, it is a difficult and challenging time for businesses who are already falling behind the new wave of online clothing retailers.