Retail insolvency set to rise in 2012

The number of insolvencies expected to hit British retailers in 2012 will rise, according to reports. With more shoppers buying online and smaller margins, the larger chains could be pushed over the edge, according to RCapital, a London-based

business restructuring consultancy.

“The new year will trigger a round of retail insolvencies which will outstrip 2008 – big bricks-and mortar retailers, those with 50-500 shops, are the ones which will really take the pain,” said Jamie Constable, RCapital’s chief executive. “With VAT payments pending, rents going up and margin erosion you’ve got increasing costs everywhere and competition against online businesses.”

According to the Financial Times, in 2008 a total of 349 retail companies were declared insolvent in England and Wales, the highest number since 2002, reporting figures from the Department for Business, Innovation & Skills.

Mr Constable said the rise in retail insolvencies would lead to more empty shops on the UK’s high streets. “You’re going to see a lot more boarded up shops on the high streets as people go to out-of-town shopping centres, Bond Street or online,” he said.

The prediction comes as D2 Jeans, the clothing chain originally set up by Scottish entrepreneur Sir Tom Hunter, entered administration, becoming the first significant UK post-Christmas casualty of the tough high street conditions.

Administrators BDO closed 19 of D2 Jeans’ 47 stores and made more than 200 employees redundant at the Dundonald, Ayrshire-based clothing retailer.

Just before Christmas La Senza, the struggling 146-store strong lingerie chain, said it planned to enter into administration, while Blacks Leisure, the heavily-indebted outdoor clothing and equipment retailer that put itself up for sale, is tipped to be sold in a “pre-pack” administration.

Despite the projected gloom there are rays of light for UK retail.

Hammerson, the property company which owns 10 regional shopping centres in England and Scotland, reported a 6 per cent increase in consumer footfall to 2.5m people during the period from Christmas day to December 28. That included the company’s busiest ever Boxing day at its Brent Cross mall in London, which saw a customer increase of 27 per cent to 65,000 people.

Image: Shop closure