New research into the state of the North East retail sector has revealed very mixed fortunes for businesses operating across the different areas of which it is comprised.
As part of its latest business stability rankings, insolvency and restructuring trade body R3 has examined the fortunes of over 4,200 businesses which together make up the North East retail sector.
The overall proportion of regional ‘bricks-and-mortar shop’ businesses with a heightened risk of going insolvent in the next 12 months (40%) is slightly above the 37% national sector average, but different kinds of retailers in the region are having very different experiences.
Home furnishing stores and market stalls in the North East are performing better than their peers across the country, while the region’s shoe shops are performing in line with the national average.
But over almost two thirds (64%) of North East book shops have a heightened risk of going insolvent in the next 12 months, compared to a national average of 36%, while 40% of the region’s clothing stores are also in this position compared to an average of 35% of their competitors around the UK.
Despite ever greater numbers of people doing their shopping on the internet, regional retailers who predominantly sell their goods online aren’t having things all their own way, with the 37% of such firms with a raised risk of insolvency being three percentage points higher than the national average.
R3’s insolvency risk tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.
The R3 research follows a recent PwC/Local Data Company report[1] which found that 216 stores owned by multiple retailers closed in the North East during 2017, compared to just 116 that were opened during the same period.
Andrew Haslam, chair of R3 in the North East and head of specialist business advisory firm FRP Advisory LLP’s Newcastle office, says: “The fact that the first quarter of the year is traditionally the most challenging for the retail sector, allied to the High Street’s well-known long-standing difficulties and the long period of poor weather we recently endured mean the issues our research has revealed don’t come as too much of a surprise.
“The regional retail sector employs many thousands of people, and its fortunes can also give an indicator of how well the wider North East economy is performing, as people are more likely to be spending more if they’re feeling confident about their personal financial position.
“There are still some good news stories in the region’s retail sector, and while there’s no overall quick fix on the horizon, it is to be hoped that more shoppers will be tempted out onto the North East’s High Streets now that better weather is arriving.
“Financial challenges can arise for any type of business at any point, and their management teams must act as soon as problems become apparent to give themselves the widest possible range of options for addressing and resolving them.”