(1 September 2009)
retail sector will dwell in the doldrums for longer
than other industries, with the number of business
failures rising in 2010, according to the latest
Industry Watch report by accountants and business
advisors, BDO Stoy Hayward LLP. Going forward,
rising unemployment will likely cause a decline
in consumer spending in 2010, driving up insolvencies.
In tandem, lower wage growth and reduced consumer
credit will also contribute to the increase in
business failures, with 4,630 expected in 2009
rising to 5,070 in 2010.
To date consumers have shown
remarkable resilience in the face of the recession.
Retail spending has held up unexpectedly well
throughout the downturn; Office of National Statistics
data shows that during the second quarter retail
sales volumes were up by 0.7 per cent quarter-on-on
quarter and 1.3 per cent compared to the second
quarter of 2008. Despite this, many retailers
have paid the price of heavy discounting which
has left profit margins painfully thin.
Tony Nygate, Retail Business
Restructuring Partner at BDO Stoy Hayward, said:
Unemployment has risen less than the economic
contraction originally suggested, with a flexible
labour market allowing employers to reduce hours
and wages rather than make redundancies. These
factors have helped maintain retail spending surprisingly
well in the face of recession and have been instrumental
in preventing even more retailers going into liquidation.
However retailers can
expect the worst of the recession to hit in 2010
when rising unemployment and structurally lower
consumer credit will dampen prospects. That means
retailers will face a particularly tough 2010,
with our research predicting over 5,000 retailers
will go out of business next year.