UK retail sector faces further woe

03 September 2009

LONDON: Over 5,000 retailers and wholesale companies could face bankruptcy in the UK next year, as the economic downturn continues to exert pressure on the country's economy, BDO Stoy Hayward, the accountancy firm, warns.

According to the company's estimates – which have displayed an accuracy rating within 5% of the actual total in each of the last five years – some 4,600 such enterprises could cease trading in 2009, double the number of failures recorded two years ago.

The Centre for Business and Economic Research helped produce BDO's latest report, and Jorg Radeke, an economist at the organisation, predicted that "retailers are going to recover more slowly than other parts of the economy."

"The sector may never reach the size it was before this recession, with unemployment expected to peak around 11% and savings rates on the rise," Radeke added.

Neil Saunders, consulting director at Verdict, the retail research specialist, also argued that there is "no conclusive evidence that retail is emerging from the recession – it is in a precarious state."

As such, it is "no longer the sharpness but the duration of the recession that is the biggest problem for retailers," he said.

The categories that are considered to be among the most vulnerable by analysts are the DIY and furniture sectors, the fortunes of which are closely tied to the ailing British housing market.

Data sourced from Financial Times; additional content by WARC staff