Retailers in trouble as administrations jump

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The Independent Online

New administration figures reveal that the retail sector is under increasing pressure with the risk of collapse growing.

The number of retail companies falling into administration in the second quarter of 2011 rose by 8 per cent to 43, according to research by corporate advisor Deloitte, with 40 companies going bust in the same period last year.

Lee Manning, restructuring partner at Deloitte, said: "The retail sector is going through a significant period of change with many companies buckling under the pressure of weakened consumer confidence and a sluggish economy."

While the overall increase in the number of retail failures in the three months to the end of June is relatively small, a significant number of them were household names.

Long-established high street chains such as Oddbins, Moben, Dolphin, Focus DIY, Habitat and Jane Norman were all hit by problems during the period.

"This signifies that the severity of retail distress is far greater than the absolute figures suggest," warned Mr Manning.

He predicted that consumer spending will continue to decline this year, as concerns grow around high inflation, unemployment and reduced disposable income.

"It is difficult to see where the positive growth will come from in the next few months," he said. "Inflation has hit retailers hard in the second quarter and unfortunately we are likely to see retail administrations increase as the year goes on."

Over the previous quarter, the number of retail administrations actually fell, to 43 from 60 in the first three months of 2011.

However, Mr Manning said that while "this may be seen as an encouraging sign, the first quarter of the year is often the period when the largest number of administrations occurs.

"This is because support provided to retailers to see them through the seasonal period is often withdrawn in the New Year," the Deloitte partner said.