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Retail bankruptcies rise 10.3% in Q2

Retail insolvencies have increased by 10.3 per cent in the second quarter of 2012 as the high street continues to suffer amid economic uncertainty, figures released today reveal.

According to a report by global professional services Pricewaterhouse Coopers (PwC), there were 426 retail bankruptcies over the period compared with 386 during the same period last year, as struggling retailers including Ethel Austin, Game and Clintons Cards closed their doors due to poor trading.

In total, there were 3,927 corporate insolvencies over the quarter, down 11 per cent on Q1 and down three per cent on the same quarter in 2011, emphasising the fragility of the UK high street.

Mike Jervis, PwC Business Recovery Partner and Retail Specialist, said that these figures highlight the difficulties facing the retail industry.

“There has been a clear reduction in the incidence of insolvencies over the current recession compared to previous ones,” he explained.

“Retail is the sector which keeps bucking this trend. In fact, quarter-on-quarter retail insolvencies have increased for every one of the last four quarters.

“Other sectors which were showing this trend, such as construction and hospitality and leisure, have had fewer insolvencies during the second quarter of 2012 than the same period last year. “

Earlier this month, administrators Zolfo Cooper announced that all remaining Clintons Cards stores would be closed by tomorrow due to a lack of interest from potential investors as “deteriorating market conditions” continue to impact the high street.

London has the highest number of insolvencies at 887, though this has fallen by nine per cent compared to the same period last year, while the North East and Cumbria saw the greatest increase with a 70 per cent rise to 277 compared with 163 in Q1 2011.

Year-on-year, the greatest reduction has been in the West, where insolvencies dropped by 32 per cent compared to 2011 and fell 29 per cent compared to the first quarter of this year.

Last week, the Office for National Statistics revealed that GDP had fallen 0.7 per cent over the second quarter of the year and Antony Gold, Head of Retail at international law firm Eversheds, believes that consumer confidence throughout the ongoing recession is having far-reaching effects.

“The fortunes of retailers are closely and inextricably linked to consumer confidence and even small shifts in consumer confidence can produce significant variations in the overall performance of the UK retail sector,” Gold explained.

“The intriguing question is why some retailers prosper and others fail? Sometimes the answer is relatively clear – the impact of differing product offerings, trends in consumer demand or the quality of management can play a clear role.

“But the explanation as to why some retailers fail is sometimes more obscure. One thing is clear; despite the bad news, some retailers are doing very well and benefiting from innovative product ranges and attractive store fit-outs.

“Despite any indication to the contrary, at least some parts of UK retail are alive and well.”

Source: Gemma Taylor, Retail Gazetter

30 July 2012
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