Thousands of retailers face Christmas collapse amid lethal cocktail of problems, experts warn

More than 20,000 small businesses are suffering from ‘significant financial distress’

Many smaller retailers could go bust when rent payments are due at the end of the month (Reuters)

Thousands of retailers are facing a Christmas collapse as a lethal cocktail of lacklustre sales, heavy discounting, increased wages and the collapse in the value of the pound push firms to “breaking point”, experts have said.

A total of 21,802 retailers across the country are suffering from “significant financial distress”, insolvency specialist Begbies Traynor said in a new report.

It warned that many shops could hit the wall at the turn of the new year when large quarterly rent bills become due. Begbies found that 97 per cent of those in financial distress are small and medium-sized businesses.

Julie Palmer, a partner at Begbies Traynor said: “Small businesses, whose margins and cost bases are already stretched to the limit, are undoubtedly the biggest victims of the increasingly cut-throat UK retail environment, unable to compete on price or provide the convenience that savvy shoppers increasingly demand.

“With the sector’s quarterly rent day just around the corner, retailers across the country will be pinning all their hopes on a last-minute sales surge from shoppers who have left it too late for online deliveries, to help tip them over into the black.

“Unfortunately, without a strong end to 2016, I’m afraid many smaller retailers in particular may not survive much beyond the January sales.”

Costs have been under pressure from the dual impact of increased import prices due to a weakened pound and rising fuel costs. Both are set to squeeze shops margins and reduce shoppers’ spending power.

Consumer spending has been held up by credit card debt, which reached a record high in October, but Ms Palmer warned that that momentum has stalled during the festive period.

The Confederation of British Industry warned yesterday that pressures on retailers would increase in 2017. CBI economist Ben Jones said: “With higher inflation beginning to weigh on households’ purchasing power, consumption patterns are likely to shift, creating winners and losers across the retail landscape.”