London fashion week may provide a coat of gloss, but the truth is UK fashion retailers are struggling financially.
19 per cent of fashion retailers show signs of insolvency new research by Moore Stephens has revealed.
35,078 fashion retailers were analysed by the accountancy firm. 6,580 showed early signs of financial distress. Indicators included a large fall in revenue and poor payment history.
Increased payroll costs and falling consumer spending were highlighted as adding pressure to fashion retailers. This damage has been made worse by the increased dominance of online retailers.
Consumer spending was at its lowest level for five years in 2017, with online spending making up a greater proportion of that than ever before.
Retail footfall has decreased by 1.6 per cent year-on-year, latest figures have shown. That’s a deeper decrease than the rate seen for January 2017 of 1.3 per cent.
Rising business rates
Many fashion retailers have increased prices or lowered profit margins to meet costs of rising business rates. This has been worsened by an increase in staff costs after the introduction of the National Living Wage. However, online-only retailers have been largely unaffected by these factors.
Jeremy Willmont, Head of Restructuring and Insolvency, says: “Clothing retailers have faced some of the most difficult trading conditions since the recession in the past year.
“Fashion retailers have been hit by the perfect storm of rising costs, falling consumer spending and increased competition. All three have heaped pressure onto revenue and made profit margins difficult to maintain.
“The increasing popularity of online-only retailers, who have more manageable bills for business rates and lower payroll, means that many fashion retailers will need to improve their ‘bricks and clicks’ offering if they are to thrive.
“Businesses that are able to adapt to changing trends and preferences will put themselves in a much better position to not only avoid insolvency, but to flourish.”