Deloitte: Retail Administrations Rise for Second Consecutive Year

The number of retailers entering into administration in 2018 was 125 - compared to 118 in 2017, a marginal increase of 6% according to Deloitte’s latest insolvency figures. In addition, the number of retailers entering into Company Voluntary Arrangements (CVAs) increased by 52%, from 25 in 2017 to 38 in 2018.

Deloitte’s research shows the number of large multi-site retailers (those with more than 10 stores) entering into a CVA last year increased significantly to 13, from just two in 2017. Large multi-site retail administration appointments also increased from 17 the previous year to 26 in 2018.

Dan Butters, partner and head of Restructuring Services at Deloitte, said: “Notwithstanding the increase in overall retail insolvencies, we have seen a significant increase in large retail insolvencies and CVAs in the last 12 months. 2018 saw some high profile retail casualties and a continued deterioration in trading conditions for retailers in the final quarter of the year.

“Consumer confidence fell in the third quarter of 2018, which, combined with inflation-driven pressure on disposable incomes, has contributed to twelve consecutive months of declining footfall. The rapid decline in the performance of the high street has driven bricks and mortar retailers to increase their levels of discounting to counter this. This comes as retailers continued to face increasing staff and property costs, and a weaker Sterling. Online retailers, however, have fared better, accounting for a record 21.5% of all UK retail sales in November.”

Deloitte’s research shows that across all industry sectors, including retail, the total number of administrations in England and Wales increased by 10% from 1,134 companies in 2017 to 1,251 in 2018.

The majority of sectors reported an increase in administrations between 2017 and 2018, with the only sectors reporting a reduction being printing and publishing (-21%) and recruitment and business services (-10%, albeit the third largest contributor with 198 appointments).

2018 witnessed an 18% growth in CVAs across all industry sectors, including retail, rising from 334 to 395. CVAs in relation to bars, hotels and restaurants, for example, increased by four times last year to 36.

Butters concluded: “The squeeze in margins has left many retailers burdened with loss-making stores. This is a key driver for the rise in the number of major retail CVAs in 2018, with retailers seeking to close stores to reduce their cost base. We expect a particularly challenging first quarter in 2019 for many retailers as the full effect of Christmas trading becomes clear.”

Source : Insight DIY

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