The number of UK retailers on the brink of collapse surged by a quarter in recent months, a new report has warned.
The strain on the retail sector follows new data showing a drop in the number of people heading to the shops during Boxing Day sales.
The latest Red Flag Alert report from insolvency specialist Begbies Traynor found 2,124 UK retailers were in critical financial distress between October and December 16.
This was 25% higher than in the previous three months, between July and September, although marked a slight decline of nearly 1% compared with the same period a year ago.
The latest figures include a 29% quarter-on-quarter surge in the number of general retailers on the brink of collapse, and a 17% jump among food and drug retailers.
Online sellers, takeaway food shops and mobile food stands, and convenience shops were among the businesses struggling the most.
Julie Palmer, a partner at Begbies Traynor, said: “This year has highlighted the resilience and adaptability of some UK retailers, but the sector remains under significant strain.
“Clearly, some retailers have found ways to manage financial pressures effectively, but others, particularly in general retail, are struggling under the weight of rising operational costs and squeezed consumer spending.”
The report from Begbies comes after data from MRI Software showed Boxing Day shopper footfall was down 7.6% across all UK retail destinations compared with last year.
However, it said this largely reflected a shift to online shopping, with analysts expecting consumers to do the majority of their sales shopping online this year.
Clothing and footwear retailers had a weaker November than previous years with sales volumes declining by 2.6% for the month, according to the latest official figures.
Homebase was one of the household names to announce it had called in administrators last month, after being hit hard by an “incredibly challenging” three years for the DIY sector.
Ms Palmer said this poorer performance in “traditionally a critical month for the sector, further underscores the tough trading conditions, as consumers hold off on purchases amid low confidence and rising prices”.
“Adding to this uncertainty, the measures announced in the autumn Budget, including the planned increase to employers’ national insurance contributions, will significantly dial up the challenges faced by these businesses,” she added.
“These changes, alongside increases to the minimum wage, will negatively impact cash flow and, consequently, we expect elevated insolvency levels across this sector during 2025.”
Ms Palmer said that the marginal year-on-year decline in the number of retailers facing critical distress provided a “glimmer of home” with some businesses finding ways to adapt to financial pressures and changing shopping behaviours.
But she said others were more “vulnerable” to online competitors such as Temu and Shein, which have drawn in swathes of shoppers attracted to low-cost fast-fashion.
Meanwhile, a total of 28,747 retail businesses in the UK were also in significant financial distress over the latest quarter, dropping from 34,494 over the same period last year.
