Retail identified as most troubled sector

The recent recession has hit nearly every business sector, with many businesses forced to close their doors in the face of such difficult trading conditions. However, it appears that the retail sector is likely to be the most affected this year, if recent predictions are anything to go by.

Data from insolvency trade body R3 revealed that British retail sale volumes for April 2012 were down by 1.1 per cent compared to a year ago. This is the largest fall in sales volume year-on-year growth since August 2011.

Furthermore, around half of the UK's insolvency practitioners questioned by R3 stated that the wholesale and retail sector are likely to experience the highest number of insolvencies this year. This is almost double the figure (28 per cent) recorded in October 2010.

Lee Manning, president of R3, commented on the figures: “We have seen a number of big name brands go bust very publicly. Our recent research shows that more retailers are experiencing the pressures caused by shrinking demand and consumer expenditure, compared to businesses in other sectors.

“Insolvency Practitioners work at the coalface of business distress and for half to choose one sector over all others brings the retail crisis into sharp focus.”

Despite the troubles faced by the retail sector, most insolvency practitioners (IPs) surveyed were unwilling to lay the blame at the feet of the decrease in consumer spending, with only 14 per cent claiming that this would have the most negative impact on business this year.

In fact, Mr Manning explained, more IPs thought that a lack of bank lending or a modest rise in interest rates would have the most negative impact on businesses. “This is perhaps a reflection of the fact that across the board, businesses are experiencing serious cash flow problems and, consequently, are looking very carefully at what they spend,” he concluded.

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