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40,000 retailers now in "significant distress" as COVID restrictions take their toll

Lauretta Roberts
22 December 2020

Some 40,000 retailers in Q4 of 2020 now say they are in "significant distress", a jump of 24% on last year, as COVID-19 restrictions batter the sector.

New figures from Begbies Traynor also show that over 20,000 high street retailers and over 11,500 online retailers are now in "difficulty" – a rise of 22% and 27% respectively since the run-up to Christmas 2019.

Commenting on the figures, Julie Palmer, partner at Begbies Traynor, said: “Without doubt, this has been one of the toughest years ever experienced in the retail sector. While many industries have been hit hard, retail – which was already suffering a crisis of confidence – has been shaken to its foundations.

"High-profile administrations such as Arcadia Group and Debenhams not only threaten thousands of jobs, they also raise questions over the future of the high-street as we know it, and I expect there to be more as we enter the New Year.

“That said, while COVID-19 has undoubtedly had a huge impact, the danger signs were there before the pandemic forced so many closures. For example, Arcadia and Debenhams were both already struggling as they had failed to keep up with more dynamic competitors with a strong online offering. However, simply being online is not automatically a ‘silver bullet’ – as these figures show, securing market share online is wildly competitive and not everyone will succeed.”

Non-essential retail has been hammered once again with new Tier 4 restrictions hastily applied across London and much of the East and South East of the country this weekend, just over two weeks after stores re-opened following November's lockdown. Wales too has closed its non-essential retail for the foreseeable future, while Scotland and Northern Ireland plan post-Christmas lockdowns.

However Palmer said there was a "speck of light at the end of the tunnel" for 2021 with the vaccine now being rolled out. Prime Minister Boris Johnson revealed yesterday that some 500,000 vulnerable people and front-line workers had been vaccinated with the Pfizer BioNTech vaccine, while there is hope that so-called "Oxford Vaccine", which is far easier to distribute, will be approved for use over the Christmas period.

But uncertainty would remain throughout 2021, Palmer said, as the Government has yet to agree a trade deal with the EU for when the Brexit transition period ends in 10 days' time and the effects of the pandemic will be felt for a long time to come.

"For retail, some major modernisations and strong leadership will be crucial to entice shoppers back, and even retailers that have proven resilient will need to keep innovating.

“Although there are increasing expectations that 2021 will bring more positivity, the effects of COVID-19 will continue to create a chill throughout the whole of the year and beyond, with it likely we are only seeing the tip of the iceberg for financial distress amongst businesses currently.

"Both recent history and these figures show yet more high profile retail and hospitality insolvencies are probable as a combination of onerous debt and the structural changes brought about by the Coronavirus pandemic continues to take its toll.”

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