Number of retailers, including Ted Baker and Farfetch, going insolvent increases significantly in last year

The number of insolvencies of retailers has increased 19% in the past year to 2,195 in 2023/24 (year end 31st January), up from 1,843 in 2022/23, according Mazars, an audit, tax and advisory firm.

High profile retail insolvencies include The Body Shop in February, as well as fashion brand Ted Baker and online luxury fashion retailers MatchesFashion and Farfetch. 

Many retailers have been hit by a combination of increased costs and cautious household spending among consumers.

Higher interest rates are also causing significant problems for any firm with a significant level of debt that is either “floating rate” or that is coming for refinancing.

Hello, you may have heard in the news that The Body Shop in the UK is under administration. We wanted you to know we’re open as usual and all our customers can continue to shop for their favourite products. And...thank you for the huge love we’ve been hearing, it means a lot 💚 pic.twitter.com/jnSVtmRMEA

— The Body Shop UK (@TheBodyShopUK) February 14, 2024

Rebecca Dacre, Partner at Mazars observes that, although inflation is moderating, retailers are still not out of the woods as many are continuing to face rising staff costs.

The national living wage for over 23-year-olds is set to increase in April 2024 to £11.42 per hour. This is an increase of 9.6% on the £10.42 per hour in 2023.

Data from the ONS reveals that retail sales fell by 3.2% in December 2023, their sharpest monthly decrease since January 2021, highlighting the impact of low consumer spending on retailers.

Whilst, in recent years, bricks and mortar retailers have been more heavily affected by insolvencies, e-commerce firms have also come under severe strain from rising costs.

The number of e-commerce insolvencies reached its highest level in five years, reaching 615 in 2023/24, an increase on the 521 insolvencies reported in the previous year.

As well as Matches Fashion and Farfetch, Wiggle, an online bike retailer, went into administration in October of last year.

Dacre says: “We are unlikely to see the retail sector trading comfortably until interest rates start to fall. Despite inflationary pressures easing, high interest rates and low consumer spending continue to persist.”

“The rise in the national living wage is the largest on record and some face a sharp rise in business rates from April.”