A RECORD 28 Scottish retailers filed for insolvency in the first three months of the year, underlining the scale of the continuing crisis on the high streets.
An analysis of Insolvency Service figures has found that the failure rate in the first quarter equated to more than 40 per cent of the total number of retailers which went bust in Scotland in 2018. Some 68 retail firms entered insolvency in 2018, the figures from accountancy firm French Duncan found.
The firm noted said the first three months of 2019 had seen the highest quarterly retail insolvency figure ever listed by the Insolvency Service.
Eileen Blackburn, head of restructuring and debt advisory at French Duncan, said: “Given that the retail sector has been experiencing steady very high numbers of business failures over a prolonged period this does not bode well for an uplift in the sector despite recently reported improved sales figures. Clearly there are major problems with retail which are not being addressed.”
Ms Blackburn added: “The news that the headline business rate has risen from 40.7% to 49% in less than ten years will surprise no-one in the sector who have long been campaigning for reform. For medium-sized and larger commercial premises the increase is greater from 41.4% to 51.6% resulting in an additional £13.2 million in rates for retailers.”
The spike in insolvencies comes amid a bruising spell for the retail sector, which is under pressure from rising overheads, the relentless growth of online shopping, and weak consumer confidence, sparked in part by Brexit uncertainty.
More than five stores closed for good in Scotland in leading shopping areas such as Glasgow and Edinburgh last year, a report published by accountancy giant PwC in April found.
Debenhams has been the highest-profile casualty this year, with the department store chain moving into the hands of its lenders following a pre-pack administration deal in April, which wiped out the equity held by shareholders.
The new owners announced the locations of 22 of the 50 stores earmarked for closure last month.
Debenhams’ failure followed the collapse in August of House of Fraser, which was acquired out of administration by Mike Ashley’s Sports Direct. Mr Ashley later failed in an attempt to buy Debenhams, and saw his near-30 per cent shareholding wiped out when it was taken over by its lenders.
The French Duncan analysis led to a renewed call for action to reduce the burden on retailers from rising business rates.Ewan MacDonald-Russell, head of policy at the Scottish Retail Consortium, said: “This is further evidence of the immense pressures facing retailers. Sluggish economic growth, rising public policy costs, and the continued effect of retail transformation are combining to make trading as challenging as at any time. Regrettably it’s clear that for many retailers the costs of operating from physical premises are becoming intolerable. “
He added: “In particular, business rates remains onerous, with the poundage rate now at its highest in twenty years. Last month’s business rates rise added £13.2m to retailers rates bills alone in Scotland. Firm action is needed to reduce this burden, and returning the Large Business Supplement to parity with England would be a sensible place to start.”
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