I get knocked down, but I get up again – insolvency in the retail sector

Company insolvencies continue to rise with the Insolvency Service having revealed that 2023 saw the highest number registered since 1993. Last year saw a record number of retail businesses failing in the UK in the last 10 years. While the number of failed businesses peaked at 61, the overall impact of this was not necessarily as dramatic as the headline figure indicates. If we compare 2023 with the pre-Covid statistics of 2019, the number of retail businesses failing that year was 43. However, the number of stores affected was comparably lower with only 971 being affected in 2023 compared to the 2051 stores affected in 2019.  This figure also translated into higher numbers of employees being affected in 2019 than in 2023 with the figures coming in at 46,506 and 20,642 respectively[1].

What do these figures suggest? There could be several reasons for the comparatively lower stores and employees being affected. One reason might be the failure of online businesses. These businesses won’t have the same level of employment as their high street counterparts. Another reason could be the Covid clear out of major high street retailers leaving behind smaller businesses with less of a high street presence. While 2023 saw the failure of many online retailers such as Party Pieces Holdings, the online party supplier set up by Carole and Michael Middleton, and UK Flooring Direct, another online business, 2019 saw big high street names such as Debenhams, Thomas Cook, Clintons and Mothercare all entering administration.

So where’s the retail sector headed in 2024? The year has started with the administration of The Body Shop, the cruelty-free and ethically sourced retailer, originally started by Anita Roddick in 1976. It’s not immediately clear what will happen to the 200 stores and around 2200 staff, but there is an indication that store closures and redundancies may be ahead. It’s also been announced that Lloyds pharmacy is to be put into liquidation. However, the impact of this on staff and high streets more generally will be minimal with most stores having been sold off throughout 2023. Interestingly, both Lloyds pharmacy and The Body Shop had been acquired by the German private-equity firm Aurelius. This isn’t Aurelius’ first foray into the UK retail sector with it having previously purchased Ideal Shopping Direct in 2018 and Office Depot in 2017, having then broken up these businesses.

What is clear is that administration does not necessarily mean the end. This year might see the revival and survival of some earlier fatalities with The Body Shop possibly leading the way. One example of this is the rescue of Wilko. In August 2023 Wilko entered administration but by December 2023, Poundland and The Range had both opened Wilko stores with Poundland having also employed 700 of its former staff.  This is a great example of the opportunities created by an insolvency – whether you’re a start-up taking advantage of more favourable lease terms or an established brand securing a bigger share of the marketplace, opportunities for growth continue to exist.

[1] Figures taken from The Centre for Retail Research

For more information, please get in contact with Gillian Murray or your usual Anderson Strathern contact.

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[1] Figures taken from The Centre for Retail Research