The total number of retailers in England and Wales falling into administration in 2011 increased by 11% from 165 in 2010 to 183, according to research by Deloitte, the business advisory firm. Despite the last quarter including the lucrative Christmas period, administrations still increased by 27% on the previous quarter, with a total of 42 retailers falling into administration compared with 33 in Q3 2011.
Simon Adcock, restructuring services partner at Deloitte Birmingham, comments: “2011 was a tough year for retailers and this trend is set to continue well into 2012. Many retailers would have been banking on the busy Christmas period to give them a much needed sales uplift, but retailers were forced into discounting at levels last seen in the aftermath of the collapse of Lehman Brothers, putting severe pressure on margins. We are likely to see a further spike in retail administrations in Q1 2012 as retailers buckle under the pressure of VAT payments falling due, impending rent payments, the increased popularity of shopping online and the traditional decline in footfall as the attractive year end sale offers come to an end.
“Moreover, what stands out in 2011 is the significant increase in household name retailers that have gone into administration including: Barratts, Oddbins, Jane Norman, TJ Hughes, Habitat and Homeform. Collectively, the plight of these companies shows the depth of the impact of the consumer recession, with more casualties anticipated as the year goes on.”
Findings from Deloitte’s recent Consumer Tracker, a new regular monitor of consumer confidence and spending habits, found that one in five households have seen a reduction in income, as a result of unemployment, loss of bonuses, reductions in overtime and increased part-time working. Consumers were found to be cutting back across all discretionary spending categories, in an attempt to reduce costs. 36% of consumers are spending less on clothing and footwear and 28% on furniture and homeware.
Adcock adds: “Spending trends in the retail sector are regarded as key indicators of current market sentiment. Whilst the rate of inflation should fall in 2012, bringing some relief to hard pressed consumers, we would expect household spending to increase only modestly in 2012.
“Overall, the total number of companies falling into administration in 2011 declined by 4% from 2,086 in 2010 to 2,010. Unfortunately, we will see a growing number of companies enter administration, as fears around the Euro zone crisis and rising unemployment increase.”