Recovering economy may be a smokescreen for retail corporate insolvency

Published on January 24, 2014 by Crawfords Accounting

Apparent corporate recovery in the retail sector may yet prove to be short-lived, with analysts warning of a ticking time bomb of corporate insolvency for some companies in the sector.

While Christmas typically brings a seasonal boost in sales across the board, it may be little more than a temporary shot in the arm for some beleaguered retailers, according to the Centre for Retail Research.

In its end of year Who’s Gone Bust? report, the centre noted that 2013 ended with a similar rate of corporate insolvency to 2011 – and not worse than 2012 as had been predicted.

Overall, 31 companies failed in 2011, 54 in 2012, and 49 in 2013, affecting 2,469, 3,951 and 2,500 stores and 24,025, 48,142 and 25,140 employees in each of those years respectively.

But 2013 had been forecasted to break all records, particularly with a shocking start to the year as HMV, Blockbuster and other high-street names faced difficulties, and the study stresses that corporate recovery thanks to seasonal sales might be brief.

The Centre for Retail Research reported: “Although some retailers have had a very good Christmas selling season, others have done very badly… The improvement in the economy may come too late for several retailers.”

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