Retailers face a collapse as costs skyrocket and emergency levels at upper tiers rise 25% after Budget
It looks like a wave of chain and independent stores will collapse in the coming months as they are hit by rising costs after the budget.
In yet another sign of the crisis on the High Street, insolvency specialist Begbies Traynor said 2,124 retailers were in ‘critical financial distress’, a 25 per cent increase on the previous quarter, according to the group’s Red Flag Alert report.
The alarming figures came a day after the Mail reported that more than 8,500 stores had closed this year, causing the loss of 130,000 jobs. Industry experts warn that worse will happen in 2025 as the sector faces a £7 billion increase in the cost of doing business after the Budget.
The latest figures include a 29 percent increase in the number of general retailers in ‘critical financial distress’ and a 17 percent increase for food and drug retailers.
Dismal Boxing Day sales also put pressure on the high street as the number of customers visiting stores fell 4.9 percent on last year, MRI Software said.
Julie Palmer, a partner at Begbies Traynor, said the sector remains “under significant pressure”, with pressures exacerbated by Labor Budget measures such as higher wages and social security benefits.
Fear for retail: A wave of chain and independent stores appears to be on the verge of collapse
These will “significantly increase the challenge these businesses face”, she said, adding: “That is why we expect to see a higher number of insolvencies in this sector in 2025.”
Much of the blame goes to Chancellor Rachel Reeves, who has broken the Labor Party’s pledge not to raise taxes with a £25 billion increase in employers’ National Insurance contributions, while at the same time delivering an inflation-busting increase in the minimum wage has pushed through.
She has failed to reform the business rates regime plaguing the High Street, an issue highlighted by the Mail’s Save Our High Streets campaign, backed by household names such as B&Q and Currys. Retailers such as HMV and The Entertainer have already announced that they will not open any new stores next year due to higher rates.
Andrew Goodacre, head of the British Independent Retailers Association, spoke of ‘frightening figures that will only get worse next year as business rates rise’, adding: ‘It must be clear to the Government that businesses on the high street are paying lower need costs, and not higher ones. otherwise we will see even more eroded shopping streets.’
Business rates are a levy based on the rental value of a property, meaning shops pay a premium compared to online giants such as Amazon. Before the Budget, bosses called on the Chancellor to extend Covid-era support schemes, which saw business rates cut by 75%.
But to top it all off for retailers, Reeves lowered this percentage to 40%. And her proposed reforms have been criticized as not going far enough to help retailers.
James Lowman, head of the Association of Convenience Stores, said this would be “felt most by those on the High Street and those running larger convenience stores and petrol stations”.
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