'More than 400 retailers' to collapse within months
Thursday 01 January 2009
Retail insolvencies are expected to soar over the next four months and hit the entire economy, as it emerged that retail footfall tumbled in December – despite a late surge in shoppers chasing bargains during the last week.
Experian forecasts 440 retailers will collapse before the end of April, compared to 367 for the same period in 2008. The data specialist said it expects retail insolvencies to jump by a further 20 per cent to 1,400 next year, as conditions on the high street deteriorate.
In December, visits to shops fell by 3.1 per cent compared with the same month in 2008, despite a 12.8 per cent jump in the last week as consumers took advantage of massive discounting and the extra shopping days before Christmas Day, according to Experian.
Jonathan de Mello, the director of retail consultancy at Experian, said: "The boost in numbers was driven by massive unprecedented discounting all at the expense of retailer margins."
The grim outlook came as PricewaterhouseCoopers revealed 42 per cent of UK consumers plan to spend less in the January sales than they did in the same month in 2008. The accountancy firm said 3 in 10 consumers are concerned about their ability to pay future debts and 16 per cent are struggling to repay current debts.
Experian estimates that one in 10 shops will remain empty in 2009 with some high streets in smaller market towns suffering far higher vacancy rates. The current proportion of vacant units is 7 per cent.
Mr de Mello said the large number of retail failures will have a significant impact on the wider revenues generated by the high street, including investors' yields on rents and money paid to local authorities. He said: "It is not just people directly employed by retailers that will suffer from the fallout this Christmas; it is also their suppliers, manufacturers and service providers. We are all going to feel the effects as there is no doubt that the impact on retail will resonate through the entire economy."
In the past two months, 10 major retailers including Woolworth's, Zavvi, Whittard of Chelsea, Officers Club, USC and Adams have appointed administrators – and more are expected in January.
Mr de Mello said: "The collapses we've seen so far are just the tip of the iceberg. At the moment, there is too much space in the market and not enough demand... We anticipate January will be the toughest for 30 years."
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