Region’s retail sector rallies ahead of Christmas as insolvency risk falls

The West Midlands retail sector is rallying ahead of what is likely to be a testing Christmas trading period, with research by insolvency and restructuring body R3 showing a widespread decrease in the proportion of local businesses at elevated risk of insolvency, plus an increase in store numbers.

The September figures, which are compiled using Bureau Van Dijk’s Fame database, reveal a year-on-year rise in the number of bricks and mortar retail stores in the West Midlands – increasing from over 11,800 to nearly 12,500 – as well as a decrease in their elevated risk levels.

In September, 42.8% had a higher than normal risk of insolvency, which is two percentage points lower than the statistic for September 2018 (44.8%).

The proportion of West Midlands online retailers at elevated risk of insolvency has also fallen, dropping from 39.7% in September 2018, to 38.6% last month. The number of online retail businesses in the region increased from almost 3,600 to just under 4,100 over the same period.

Of the retail specialisms monitored in the region by R3 – which include home furnishing stores, clothes shops and leather goods retailers – it is book stores which have shown the greatest reduction in elevated insolvency risk levels. Last month, 42.2% of book stores in the West Midlands were at elevated risk of insolvency, which is almost ten percentage points lower than the September 2018 statistic of 52.1%.

R3 Midlands xhair Eddie Williams, a partner at Grant Thornton in Birmingham, said: “This indication of a possible slowdown in heightened insolvency risk gives retailers a glimmer of hope in the run-up to Christmas. Coupled with the growth in the number of retail businesses in the West Midlands in the last twelve months, it would suggest that there is still confidence in the sector.

“We should be in no doubt, however, that a large number of our region’s retailers are still facing strong economic challenges to their success. Their survival has not been helped by the fact that legislation designed to help cut property tax for shops failed to make it through Parliament before it was suspended earlier this month.

“As the highly competitive pre-Christmas trading period begins, it is vital for business owners to monitor company finances carefully and plan for all eventualities. If cash flow becomes a major challenge, professional advice should be taken at the earliest opportunity.”