More U.K. Retailers Fight to Survive After One of Worst Years

(Bloomberg) -- The number of British retailers fighting for survival has jumped by about a quarter this year.

Almost 40,000 companies -- selling both online and in stores -- are currently in “significant financial distress,” according to a survey by insolvency firm Begbies Traynor Group Plc. The figure has risen 24% since this time last year as retailers grappled with the escalating impact of Covid-19. It has climbed 11% just since September.

“This has been one of the toughest years ever” for retailers, said Julie Palmer, partner at Begbies Traynor, in an emailed statement. “While many industries have been hit hard, retail -- which was already suffering a crisis of confidence -- has been shaken to its foundations.”

Shops in Britain had only recently reopened from lockdown when the government ordered non-essential stores in southeast England to shut again on Sunday in a bid to stem a more infectious mutation of Covid-19. Enforced closures in the run-up to Christmas -- and less than two weeks before the end of the Brexit transition period -- could prove fatal for some companies.

This year has already seen the collapse of a number of chains, notably Debenhams, the department store operator, and Philip Green’s Arcadia Group Ltd. Between them, they employ more than 20,000 people. Both had been struggling for some time, weighed down with costly stores as they tried to compete with online upstarts. Covid-19 only accelerated their demise.

“Faced with the prospect of losing 2 billion pounds ($2.7 billion) per week in sales for the third time this year, many businesses will be in serious difficulty and many thousands of jobs could be at risk,” said Helen Dickinson, chief executive of the British Retail Consortium, an industry trade body.

Even those who seemed to be faring better are taking the hit. On Monday, Mike Ashley’s Frasers Group Plc, which owns the Sports Direct brand and is in negotiations to save part of the Debenhams business, withdrew a profit forecast made only 10 days earlier. It said it could no longer commit to a prediction for profit to increase 20% to 30% this year, given a shutdown of many stores during “peak trading and the high likelihood of further rolling lockdowns nationwide over the following months.”

Shares of Frasers fell more than 10% on Monday, contributing to a broader sell-off among fashion retail stocks.

Retailers are calling for fresh financial support from the government to help them weather a crisis made worse by the current chaos at British ports -- which followed the decision by a number of EU countries to temporarily close their borders with the U.K.

Julian Dunkerton, chief executive officer of Superdry Plc, said the U.K.’s town centers face a “bleak” future without help. “The government needs to act urgently,” he said, calling for a reduction in the value-added tax shoppers pay on certain goods, among other measures.

©2020 Bloomberg L.P.