It is predicted that the UK’s retail industry will “flatline at best” in 2018 and many retailers should prepare for a survival battle.
Stagnant wage growth and inflation has led to shrinking disposable incomes and the subsequent lacklustre consumer spending will harm the retail sector this year. This is according to the KPMG/Ipsos Retail think tank in a recently published report.
Focus points for the retail sector in 2018
- Demand for non-food items will decrease due to increasing prices for food items causing the divide between the two to widen.
- Tough trading conditions could also see more consolidation. Last year Sainsbury’s acquired Argos and wholesaler Booker Group was taken over by Tesco. But smaller retailers could also be the subject of mergers and acquisitions.
- Brick-and-mortar shops will continue to feel the pressure as the popularity of online shopping continues to increase.
The introduction of General Data Protection Regulation (GDPR)
Something we’ve mentioned before here at Clarke Bell is the challenges that the introduction of the General Data Protection Regulation (GDPR) will bring to businesses, and the retail sector is no different.
Retailers must be prepared for the upcoming changes which will be implemented in May. Non-compliance could cause substantial losses to retailers as fines up to 4% of their total revenue can be issued.
How will Brexit affect the retail sector?
According to the findings of the think tank, the health of the retail sector will be dependent on the outcome of Brexit negotiations. It is thought that a soft Brexit would result in very minimum growth whilst a hard Brexit would see the retail market actually contract. But Brexit is also likely to have an impact on consumer confidence which will have a knock on effect on the health of the sector.
Chief executive of e-commerce consultancy Practicology, Martin Newman said:
“Continued uncertainty around Brexit and its implications is undoubtedly affecting consumer confidence, which is clearly on the wane.”
Administration risk
The Centre for Retail Research also predicted that around 164 medium-sized companies may be at risk of entering into administration throughout 2018. This would result in the loss of 22,600 stores and 140,000 jobs. Last year 42 retailers failed.
The options for those companies struggling within the retail sector
For struggling companies within the retail sector, there are a range of options. At Clarke Bell we’ve worked with a range of companies to find the best solution to their problems. One of the most common course of actions is to enter into a Creditors’ Voluntary Liquidation (CVL).
A CVL means:
- your limited company will close down (i.e. go into liquidation)
- your business debts will be dealt with
- your legal obligations as a director will be met
- you can then have a new, fresh start
When you appoint Clarke Bell Insolvency Practitioners the cost of the CVL is from just £2,995 (including VAT and the required disbursements).
However, a CVL is not always the best option route and it will depend entirely on the individual circumstances.
John Bell, senior partner at Clarke Bell, said:
“The retail sector is likely to have a tough time ahead. However, there are plenty of companies that are doing things right and making healthy profits. They are giving their customers what they want, at a price they are prepared to pay…with effective marketing strategies and sound management.
However, if a company is struggling and their owners are worrying about their prospects, they should seek professional advice straight away. This will help them quickly address their problems and enable them to pick the best option for them to successfully deal with their situation.”
Contact us now (for free advice) on 0161 907 4044 or [email protected]
