Profit warnings by retailers have reached a seven year high and restaurant groups are in turmoil, as more businesses are squeezed by competitive price pressures, increased costs and consumer caution.
Recent findings, described by experts as a “worrying omen” for the sector, show that thirteen retailers listed on the London Stock Exchange did not meet City expectations in the first quarter, and almost half have issued profit warnings in the past 12 months.
“Cyclical and structural pressures are once again colliding to reshape the UK’s high street,” a spokesperson says. “There is still growth at home and especially abroad, however, 2018 is unquestionably a less benign year for many UK companies exposed to the UK consumer economy.”
Property firm Colliers International, also published research which found that, in the past 12 months, fifteen major retailers or restaurant groups have either applied for Company Voluntary Arrangements (CVA) or gone into administration – just one less that the 16 businesses which collapsed during the worst months of the 2008-2009 financial crisis.
Head of business rates at Colliers, John Webber, explains that whilst higher wages, increasing costs and a decline in consumer confidence has heavily impacted retailers, many have also been hit hard by the recent increase in business rates.
According to UK Hospitality, pubs and restaurants alone are paying £1 billion a year more in rates than they should be because of a lag in relief from the revaluation and a drop in their rate bills – it takes five years of “transition” before they are allowed to pay their bills at the new revalued level.
Kate Nicholls, Head of UK Hospitality, says: “Restaurants are reeling from blows that have brought a dynamic, innovative sector to its knees. Hospitality helped drag the economy out of the financial crisis, creating half a million jobs since 2009, but soaring rates, inflation and limited relief have crippled many employers.”
Mr Webber adds: “The fact that 10 sizeable retailers or restaurant groups have gone into administration or CVA since the beginning of the year is extremely worrying. Our figures do not even include all the small independent stores that have gone to the wall too.”
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