New data has revealed that the retail sector accounted for around one in seven UK insolvencies during the first half of 2024, meaning that the sector saw a greater number of administrations than any other over the period.
According to the data, from law firm Shakespeare Martineau, there were 119 insolvencies in the retail sector during H1 2024 out of a total of 879 across the UK during the period.
This was a 16 per cent increase from the same period in 2023 and a 42 per cent rise compared to H1 2022. The figures meant that the sector saw more insolvencies than other sectors, including those that have seen particularly high insolvency levels over recent years, such as construction, manufacturing and hospitality.
Construction, long the sector that has seen the highest number of insolvencies and often regarded as a bellwether for the wider UK economy, saw 105 insolvencies during H1 2024, up from 91 during the same period last year.
Other sectors to see high insolvency levels so far this year were manufacturing (which had the second-highest number of insolvencies with 108, up from 91 in H1 2023), real estate (92, up from 59) and hospitality (78, down marginally from 79).
Andy Taylor, partner and Head of Restructuring at Shakespeare Martineau, said that continuing high insolvency levels were “indicative of the prolonged economic challenges that are plaguing the country.”
He continued: “The data highlights the disproportionate impact on the retail, manufacturing, construction, real estate and hospitality industries in particular, which, together, constitute a substantial proportion of all administrations.”
“Changing consumer buying habits means the retail and hospitality sectors are bearing the brunt, and there has also been a reduction in housebuilding, which has a knock-on effect in the construction and real estate sectors."
Despite recording the highest number of insolvencies during the first half of the year, sales in the retail sector recently saw a boost, potentially indicating that the industry could be returning to an upward trajectory heading into the all-important summer period.
Retail sales slumped 1.8 per cent during April amid widespread wet weather. However, during May, ONS figures showed a 2.9 per cent increase, beating expectations of a 1.8 per cent rise, driven by strong sales in clothing and furniture.
The increase in spending was attributed to the May bank holidays, as well as households finally beginning to feel the benefit of falling inflation, the cut to National Insurance and the National Living Wage increase.
Despite these improvements, Shakespeare Martineau noted that businesses were continuing to suffer as a result of high interest rates and higher levels of activity on the part of HMRC.
Andy Taylor commented that many businesses had "thrived in a sub-2 per cent interest rate environment” and could only bear the pressure of high interest rates for a limited time before their cash reserves began to dry up.
He added: “Moreover, HMRC continues to be more active, with threatened enforcement pushing businesses towards considering their options, and many opting for administration as an alternative to being wound up on a compulsory basis."
Looking at the geographic spread of H1’s insolvency data, the highest number of filings were seen in Greater London (22 per cent), followed by the North West (17 per cent) and Yorkshire and the Humber (11 per cent).
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