Home Finance & Investments Slight Reduction In North East Retail Sector’s Insolvency Risk

Slight Reduction In North East Retail Sector’s Insolvency Risk

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The proportion of North East retail businesses facing a raised risk of insolvency in the next year has fallen – but more than two in five of them are still facing potential problems, according to new research by insolvency and restructuring trade body R3.

R3’s research found 40.7% of the active retail businesses across the North East with a bricks-and-mortar presence have an elevated insolvency risk, a slight fall from 42% in June.

Online retailers in the region are faring slightly better overall, with 36.3% currently having a raised insolvency risk, compared to 38.7% in June, although this figure is still above the UK average in September of 34.9%.

North East retailers operating from market stalls have seen the biggest improvement in trading conditions, with the regional sector’s level of elevated insolvency risk falling from 35.3% in June to 30% in September, and sectors including motor retail, home furnishings and footwear have also registered small improvements.

The proportion of all retail companies in the North East at higher than usual risk of insolvency rose from 25% in January 2017 to 40% at the end of 2018, although it has stabilised during 2019 despite continuing difficulties across the wider sector.

R3’s latest research follows on from recent research by PwC and the Local Data Company which found that a net 1,234 stores had shut on Britain’s top 500 high streets in the first half of 2019, with the North East losing a total of 38 chain stores in that period.

Andrew Haslam, North East chair of R3 and head of specialist business advisory firm FRP Advisory LLP’s Newcastle office, says: “The improvements that we’ve seen since the summer are hardly dramatic, but given the retail sector’s long-term difficulties, any improvement will clearly be very welcomed.

“We’re moving into the most important part of the retail year and while the many difficulties clearly exist for retailers aren’t going to disappear, the hope will be that a strong run-up to Christmas will further improve the overall picture.

“If any retail business owners feel that their finances are reaching a critical point, they should be proactively engaging with their creditors as soon as they can.

“Landlords may be willing to provide a degree of flexibility if the alternative is ending up with empty space to fill, while suppliers and customers should be more likely to stay onside if they feel they have a full picture of where things stand and what’s being done to tackle any problems.

“In an uncertain economic climate, owners and managers of all businesses need to maintain a strong grip on their financial figures, so they can take swift action if they see any potential problems coming their way, and shouldn’t be shy in seeking the sort of qualified outside advice that might make a key difference to the long-term viability of their operations.”