One in three of area’s retailers at risk of insolvency

Some retailers are struggling to pay their rent at a time when many shoppers are keeping a tight grip on spending.

On Rent Quarter Day – which is due at the end of this month – retailers pay three months’ rent in advance. There is often a rise in retail insolvencies shortly afterwards, because of the squeeze on cash flow and complex rules on administration costs.

R3’s research, using business information company Bureau van Dijk’s database of company information, found that 29 per cent of retailers in the region have a higher than normal risk of entering an insolvency procedure in the next 12 months. However, this figure was slightly lower than the national average of 31 per cent of retailers across the UK.

William Ballmann, chairman of R3 in Yorkshire and partner at law firm Gateley, said: “High street retailers have had a tougher time of it than other sectors in the past few years. Now, after dealing with recession, a sluggish recovery, and changing consumer habits, traditional retailers will be put under more pressure as they are exposed to the stresses of expansion as economic recovery picks up.

“Insolvency isn’t the end of the road for a retailer though. It can be an opportunity to restructure and rethink the business model. Many retailers have come out of administration and gone from strength to strength.”

According to R3’s analysis, there are 117,016 retail companies in the UK. Of these, 5,082 are classified as being at high risk.

In Yorkshire and North Lincolnshire, there are 8,771 retailers, and 347 of these are considered at high risk, according to R3’s research.

According to the study, the Calderdale, Kirklees and Wakefield districts in West Yorkshire collectively have the highest number of retailers under serious risk.

Out of 1,606 retailers in Calderdale, Kirklees and Wakefield, 70 are considered to be at high risk.

R3’s Business Distress Index, which was published in July, found that 42 per cent of retailers were experiencing signs of financial distress, compared with 35 per cent of all UK businesses.

Rent Quarter Days traditionally fall on March 25, June 24, September 29 and December 25.