Research shows one-third of retailers risk collapse
A probe into 5,600 retail firms reveals worrying signs of business failure
Print13 February 2013
Over one-third of retailers could be in danger of collapse, according to an analysis of almost 5,600 companies in the retail sector conducted by business and credit risk analyst, Vision-net.
Vision-net stress-tested 5,597 retailers across the economy, selected randomly from its database, and found that 36%, or 1,992, of them were showing signs of business failure.
The analysis categorised 19% as being at medium risk of collapse while 45% were deemed low risk.
Vision-net’s survey sample was based on NACE codes, the pan-European classification system that groups organisations according to their business activities.
The figures come after recent high-profile retailers including Black Tie, HMV and B&Q recorded trading difficulties.
According to Vision-net’s figures, companies in retail and wholesale sector made up 8% of insolvencies so far this year.
But firms in the hospitality and construction sectors showed the most acute signs of trading difficulty, recording risk failure levels of 52% and 40%, respectively.
Vision-net’s figures show that, last year, companies in retail and wholesale sector accounted for 14% of insolvencies.
But of the business start-ups recorded so far this year, 11% are in the retail and wholesale sector, according to Vision-net’s figures.
Recent figures from the Central Statistics Office show that the volume of retail sales in December were down 0.1%, compared with November, while there was an annual decrease of 1%.
According to recent figures from Forfás, the Government’s advisory body on enterprise, the retail and wholesale sector accounts for 11% of value-added in the economy, directly employing about 272,000 people.
Christine Cullen, managing director of Vision-net, said the retail and wholesale sector is highly connected with other industries such as transport, storage, business services, IT and agriculture.
"The sector accounts for over 14% of jobs in the country but, as our figures show, the high street is feeling the impact of curbed spending as a result of pay freezes, job losses and sapped confidence. Anecdotally, we know that retailers and wholesalers are coming under increasing cost pressures from upward only rents. However, last week’s deal on Ireland’s debt burden could generate positive economic sentiment which is key to a recovery in the retail sector. The latest figures from IBEC showing that consumer spending power is expected to stabilise this year and improve next year are encouraging, too," said Cullen.
Vision-net urged consumers and companies use credit check and risk analysis services before making decisions with their money.
‘This is especially important when consumers get credit notes for goods returned or when they buy gift vouchers which cannot be redeemed should the retailer stop trading,’ added Cullen.
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