Scottish retail failures highest in five years

The number of retailers in Scotland going bust in 2018 is set to be the highest in five years, according to new analysis of the sector by leading accountants and business advisers French Duncan.

The firm has analysed official Insolvency Service statistics and found that 56 retailers have gone bust in the first three quarters of this year which is already higher than the 48 which collapsed during the whole of 2017.

The figures indicate that the annual figure for 2018 could be as high as 75 or 80 retailers for the year.

Additionally, retail failures have accounted for 7.8 per cent of all corporate failures in Scotland over the last five years. Between 2012 and 2017 298 retailers in Scotland have gone bust which equates to one retailer entering insolvency every week over the entire five-year period.

Eileen Blackburn, head of restructuring and debt advisory at French Duncan LLP, said: “The last year has seen some well publicised retail failures in Scotland and the rest of the UK. There is clearly a serious issue concerning the future viability of the High Street due to several factors. Internet shopping is undoubtedly playing its part but there are other factors at play including very high business rates and inflexible landlords.

“With the key Christmas trading period coming up many retailers will be hoping that they survive into the New Year with a healthy bounce in their sales values and volumes. The latest Retail Sales Index for Scotland figures (which excludes non-store retailers) show a divergence in performance between smaller and larger retailers. The data shows that overall volumes were up 1.3 per cent year on year but fell 0.5 per cent among small to medium sized retailers while rising 1.6 per cent among larger retailers. This could be a sign that the downturn in the High Street is having a greater impact upon the smaller, more local retailers while larger concerns are more able to utilise their greater marketing budgets and stronger locations to maintain volumes.”

Ms Blackburn continued: “At the heart of this, of course, is a High Street which has a business model which does not reflect the changing spending habits of the nation. Not only do people want to spend more online, they want their High Streets to be different experiences. Yet the landlords and councils who charge rent and rates have not moved with the times either and are locking retailers into excessively long leases and charging very high business rates regardless of the economic realities of the High Street in 2018.

“Add to this skill shortages which may arise from Brexit (retail has a very high proportion of EU nationals as employees) and you have a sector which is financially struggling to manage which is resulting in these high levels of business insolvency.”

Ms Blackburn concluded: “Of course, the problems faced by retailers and the wider issues of the High Street will not be resolved overnight but there must be something done to rejuvenate the beating heart of our economy if we are not to experience dead town and city centres in the future. There needs to be local and national government intervention to reduce business rates, to incentivise landlords (through tax breaks for example) to be more flexible approach in leasing for shorter periods which encourages more start-ups and young companies, and for greater planning to ensure our town and city centres remain lively, dynamic, and viable places for the retail economy to thrive.”