Research by Opus Business Advisory Group has shown that the overall financial health of the UK’s retail sector has dropped by 10% in just the past 10 months alone.
This comes as the Insolvency Service confirmed that retail insolvencies in the first half of 2023 were 61% higher than the last comparable period, the first half of 2019 pre-pandemic.
Opus used the Company Watch financial analysis system to examine the latest published accounts of 138,180 retail companies.
The health rating of these companies has fallen from 41 out of a maximum of 100 in October 2022 to only 37 now. Across the economy as a whole, this figure is around 48 out of 100, showing how weak the retail sector now is.
Any company scoring 25 or less on the Company Watch system is in its Warning Area and has a one in four chance of filing for insolvency or undergoing a major financial restructuring within three years. There were 58,887 retailers in the warning area, meaning that more than two in five could fail.
Opus also broke down its research by the size of the company, which confirmed that many smaller retailers are in dire straits.
Those with total assets of £125k or less saw their health score fall from 35 to a deeply vulnerable 32. Half of them (some 46k) are in the Warning Area. Even among the larger retailers, 18% of them are at risk of failure.
Nick Hood, senior business advisor at Opus, said: “After a summer to forget for many retailers and a potentially difficult Christmas ahead as the cost of living and interest rate crises continue to curb consumers’ spending power, these figures are deeply worrying.
“There’s a real risk of wholesale failures among smaller retailers and further casualties among larger household names over the next six months and beyond.”