Retailers and wholesalers have some of the highest insolvency rates out of any sector in the UK, new research has shown.
Data from the Insolvency Service found that more than 1,200 retailers capitulated in 2018, showing a 9% increase in insolvencies year-on-year.
Meanwhile, new retail and wholesale businesses struggled to gain a foothold in the market, reporting the second highest underlying number of new company insolvencies.
Stuart Frith, president of insolvency and restructuring trade body, R3, blamed part of the insolvency increase on “weak consumer demand”.
He said: “After three years of relatively flat numbers, 2018 saw insolvencies creep back up to levels last seen in 2014.
“The pressure point for businesses most frequently cited by our members is weak consumer demand. People just don’t have much spare cash at the moment, reflected in the rise in the number of personal insolvencies also confirmed today.”
Frith said that the uncertainty surrounding Brexit is forcing businesses to hold off on investment decisions which is affecting their suppliers and customer networks.
“It has also prompted some companies to stockpile, putting a squeeze on cash flow and reserves.
“An area to watch in 2019 will be public service provision. Businesses, social enterprises and charities in the health and education sectors are being hit by a double whammy: Government funding or subsidies are being cut, while these sectors are also expected to pick up the slack for work that the public sector doesn’t have the resource to carry out anymore.
“Government proposals to give itself priority status for repayments in insolvencies may well have a negative impact on the ability of small businesses to finance themselves this year.
“With uncertainty in the supply chain, many businesses will be seeking to increase their stock levels to counteract this and will require new finance to do so. But if funders are concerned that the Government will take a bigger cut if things go wrong, then lending decisions become much harder.”