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Firms Should Focus on Finances as Retail Insolvencies Soar

Insolvencies in the UK’s retail sector have skyrocketed nearly 60 per cent over the past year as bad debts pile on the pressure.

 

The British high street has proved to be an unreliable working environment, with low profits driving retailers into restructuring procedures and even insolvency. Low consumer confidence inspired this drop in profits, with sluggish wage growth leaving consumers with a minimum household budget. The lingering Brexit uncertainty has also affected consumers and business owners alike, creating a business landscape that struggles to attain prosperity for either.

Despite growing hopes that the recent bout of warm weather could have a positive effect on retail profits, insolvencies have soared.  The research from Creditsafe’s quarterly Watchdog Report revealed that during the second quarter of 2018 saw a total of 416 retail insolvencies, compared to just 261 a year earlier. The sector furthermore experienced a staggering 2464.5 per cent increase in bad debt owed over the last quarter, rising from just £2.1 million to £53.6 million.

With political uncertainty still prominent, and wage growth and consumer confidence still stunted, the atmosphere looks unlikely to improve without significant effort from the retailers themselves.

At the Credit Protection Association, many of our Members work within the retail sector and have approached us for immediate aid. While our debt recovery services provide our Members with financial confidence, we also encourage them to improve their position themselves, advising them to scrutinise both customers and suppliers. Our objective is for our Members to be awarded the ability to pursue expansion opportunities or merely solidify their position on the high street.

Creditsafe chief executive Chris Robertson said: “The growing number of job losses and empty shops right across Britain is a big cause for concern.

Despite the rising number of insolvencies, there was also a 40.3 per cent increase in new companies created to 11,475 during the same period, while supermarkets like Asda, Iceland and Ocado were the saw the fastest growth in their store estates.

“Nevertheless, it’s promising to see the resilience of entrepreneurs in deciding to open up new businesses in the face of uncertain and changing market conditions,” Robertson said.

“It’s this positive attitude that will be needed to see the retail sector through this tough period.”

 

“2018 is proving to be an extremely difficult year for the UK high street, with many well-known chains unable to cope with increasing numbers of consumers visiting larger stores and turning to online shopping,” Creditsafe chief executive Chris Robertson said.

This year has seen the country’s favourite chains and retailers disappear from the high street. While household names such as New Look and Mothercare have kept themselves afloat through Company Voluntary Arrangements, retailers such as Toys R Us have lost too much momentum to pick themselves up and have fallen into insolvency.

When you are a business owner, you must be prepared for any shift in the economic and consumer-driven landscape. Industry giants like Toys r Us and Carillion were not prepared, with Carillion’s leaders even dismissing profit warnings instead of heeding them. There has always been a general misconception that so-called ‘blue-chip’ companies are invincible and incapable of collapsing. Recent events have disproved this belief.

At the Credit Protection Association, we have rescued our Members from the brink of insolvency and redirected their downward trajectory. With retail insolvencies rife, low business confidence has led owners to assume the smallest hint of financial distress will send them to the insolvency practitioner. This is not the case.

The Credit Protection Association is more than a debt recovery service, but also a credit management company. We provide our Members with an injection of cash not through borrowed funds but through the recovery of owed debt; chasing unpaid invoices that had gone astray and clearing out any residual debt that had weighed heavily on our Members.

Simply put, we improve our Members’ finances. We utilise our credit checking facilities and status reports to identify the late payers and strengthen defences to blockade repeat offenders.

While the retail industry may be battling low profits and disinterested consumers, businesses do have the tools to fight back. By approaching third-party credit managers like us at CPA, businesses will strengthen credit and cash flow, and prevent insolvency. This attention has been a boost to our Members’ financial confidence and allowed them to pursue expansion projects and grab consumer attention once again.

Here at CPA, we fight to the tooth for our Members, particularly those who are navigating the horrors of the British high street. We have now created a new department within our company dedicated to getting our members rightly compensated in accordance with the Late Payment of Commercial Debts (Interest) Act 1998. This has unlocked hidden cash and potential for our members and brightened their prospects and longevity within the retail landscape.

 

 

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The Latest Insolvencies to 18 Jul 2018

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