Glut of retailers could go bust in new year

A glut of retailers face going bust in the New Year when banks pull the plug on finance, an insolvency specialist warned today.

Begbies Traynor has 323 UK retailers on its "critical watch list", the Financial Times said, which the firm defines as having a 70 per cent chance or more of failing.

Begbies said it expected banks to grant debt-reliant retailers a "banking honeymoon" until the end of the year when they will call in the loans as trading woes deepen. Retailers borrow the most in September and October in the run-up to Christmas because of payments to suppliers.

Begbies partner Mark Fry told the FT: "There is every chance we will see a rash of retail failures at the start of 2009."

He added: "Banks will be very reluctant to pull down any more retailers than they absolutely have to.

"No matter how poor a festive season they have, the bank's position will be better in early January because at least some of that stock will have been turned to cash, which will have reduced the amount owed to the banks to what is normally the low point in the annual cycle."

No retailers on the critical list were identified, but Mr Fry said he expected businesses that were not very diversified and those with weak on-line businesses to face the greatest challenge.

Begbies fears come amid evidence that credit insurance issuers are withdrawing cover to some suppliers, suggesting increased fears in the market that some high street operators will go bust.

In the past two weeks fashion chain Miss Sixty and soft furnishings group Rosebys have gone into administration. Discount retailer Ethel Austin and wedding present supplier Wrapit have also succumbed this year.

There were some signs last week that the downturn was tightening its grip on the retail sector.

High street bellwether John Lewis said sales declined by 8.3 per cent year-on-year to £48.7m in the week to last Saturday.

And Marks & Spencer said UK like-for-like sales fell 6.1 per cent in the 13 weeks to 27 September.

The results prompted retail analyst Nick Bubb at Pali International to warn that retailers were facing their worst Christmas for at least 30 years.