More British retailers in ‘critical financial distress’ since Budget

The number of UK retailers in ‘critical’ financial problems has soared due to the latest budget and sluggish sales, according to new figures.

Insolvency specialist Begbies Traynor revealed that 2,124 UK retailers were in ‘critical financial distress’ between the start of October and December 16, compared to 1,696 in the previous three months.

Companies that provide mail-order retail sales, as well as takeaway shops and mobile food stalls, are particularly affected.

Begbies suggested this reflected “worsening pressures” from seasonal demand, rising operating costs and falling consumer confidence following the October Budget.

Chancellor Rachel Reeves stated that from April, employers would pay a 15 per cent national insurance rate on staff salaries above £5,000, instead of the current 13.8 per cent levy on wages above £9,100.

She also said the National Living Wage would rise by 77p to £12.21 an hour, alongside increases in capital gains tax rates on the sale of business assets.

Many leading retailers have warned that the measures could force them to raise prices, cut wages and jobs or close stores.

At the same time, the UK retail sector is experiencing weak demand, largely due to continued cost of living pressures.

The Office for National Statistics estimated that retail sales fell 0.7 percent in October and grew just 0.2 percent in the four weeks ending November 23, instead of the 0.5 percent forecast by analysts.

Nevertheless, Begbies found that the number of UK retail businesses in ‘critical’ financial distress fell marginally year-on-year, while the number of UK retail businesses in ‘significant’ distress was 17 per cent lower at 28,747.

Julie Palmer, partner at Begbies, commented: ‘This year has highlighted the resilience and adaptability of some UK retailers, but the sector remains under significant pressure.’

She added: ‘It is clear that some retailers have found ways to manage financial pressures effectively, but others, particularly in general retail, are struggling under the weight of rising operational costs and depressed consumer spending.’

Palmer went on to say that the changes revealed in the Budget will hit cash flow and are likely to result in more retail businesses becoming insolvent by 2025.

“Looking ahead to 2025, the outlook is very mixed,” she warned.

‘While some retail businesses are adapting to these pressures, many others remain vulnerable, especially in the face of rising wages, online competition from the likes of Temu and Shein, and fragile consumer confidence.

“With challenges mounting on the horizon, weaker companies are likely to experience little joy as we head into the new year.”

The Begbies figures come a few days after revised ONS figures showed the UK economy flattening between July and September.

The services sector showed no growth during the period, while an increase in construction activity was offset by declining manufacturing output.