Retail administrations on the rise

Retail administrations on the rise

It's been a difficult time for retailers in recent months as consumers remain cautious, reluctant to overspend in an environment of tough spending cuts.

As a result, many have been struggling with cash flow problems, which have left some in a vulnerable position.

According to the latest figures from accountancy firm Deloitte, the number of retail firms falling into administration rose in the second quarter of the year.

Overall, some 43 retail companies called in administrators to rescue them between April and June, compared to 40 in the same period a year ago.

This represented an increase of eight per cent over the 12-month period.

The second quarter figures were substantially lower than the first quarter, when 60 firms went into insolvency administration.

However, as Deloitte partner Lee Manning explained, seasonal factors may be responsible for much of the decline.

"The first quarter of the year is often the period when the largest number of administrations occurs," he remarked.

Commenting on the retail environment, the spokesman said the sector is going through a "significant period of change" at the moment.

As a result, many companies are "buckling under the pressure" of weaker consumer confidence and a sluggish economy.

"Whilst the overall increase in the number of retail failures this quarter is relatively small, we have seen a significant number of household names falling into administration," he pointed out.

Among them are wine merchant Oddbins, kitchen retailer Moben, furniture chain Habitat and clothing retailer Jane Norman.

"This signifies that the severity of retail distress is far greater than the absolute figures suggest," Mr Manning warned.

He also noted that consumer spending is expected to decline further this year as concerns around inflation and unemployment grow.

"It is difficult to see where the positive growth will come from in the next few months," he stated.

"Inflation has hit retailers hard in the second quarter and unfortunately we are likely to see retail administrations increase as the year goes on."

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