More than 4,000 UK retail groups experienced major financial difficulty in November and early 2010 is expected to see a large number of chains collapsing, according to stark new research for Telegraph Media Group by Begbies Traynor, the corporate recovery specialist.
Some 4,021 retailers faced "significant" problems over the month of November, just 2pc fewer than in November last year when the consumer economy was crippled by the global banking collapse. Scotland and the South-West of England saw the number of distressed stores rise significantly over November compared to last year while 75 retailers had "critical" problems in November, compared to 100 last year.
The figures are part of Retail Stress Indicator in conjunction with Begbies Traynor, a new survey which will run weekly on telegraph.co.uk from this week. The Stress Indicator will show how many retailers are in trouble and the geographic region of the stores in question. The retailers could be chains as well as stand-alone stores.
Begbies Traynor defines retailers facing "significant" problems as those facing court actions or those with poor financial accounts. "Critical" retailers are those with wind-up petitions or County Court judgments against them totalling £5,000 or more.
The fact that so many stores are struggling so close to Christmas suggests that the economic recovery is some way off. Some £34.4bn is spent on UK high streets in December and the month is crucial to retailers' financial well-being.
Nick Hood, senior London partner at Begbies Traynor, the corporate recovery specialist, said that the outlook remains bad.
"Nobody should be lulled into a false sense that the UK retail is in recovery mode by taking at face value an apparent 25pc fall in the numbers of critical actions against retailers. This time last year the news that restructuring advisers had been appointed at Woolworths had destabilised stakeholder sentiment in the retail market, leading to a sharp reassessment of risk and ultimately to the collapse over Christmas 2008 of 15 major national and regional store chains, many prior to Christmas Day.
"The worst impact of another tough Christmas is likely to be felt in the early part of 2010, as the distorting impact of the VAT rate change is felt with full force."
On Friday Richard Hyman, strategic retail adviser at Deloitte, said that 40pc of people were intending to spend less this Christmas than they did last year.
Mr Hyman said: "Consumers and retailers will be looking to the pre-Budget report. One area that may receive attention is VAT, with some suggesting it may be raised above the already planned increase back to 17.5pc from January 1. An increase of 1pc in VAT would raise £5bn for the Exchequer but would be a blow for the high street."
