Insolvencies in the UK poised to rise 18%, reports financial health company

Corporate health monitoring specialist, Company Watch, claims it’s probable some more well-known retailers will struggle to get through 2012, as battle fatigue finally claims weary retailers who have been beset by stronger online competitors and bargain-hungry shoppers.

The first Christmas trading statements from UK retailers, starting this week, will soon show how much heavy price discounting has hit profit margins of many leading UK retailers, it says. 

However, it won’t just be retailers facing insolvency, according to the company.

Company Watch expects the total number of UK corporate insolvencies to rise to as many as 27,500 in 2012, an increase of 18% on the figure for the year to September 2011.

Last week’s flurry of retail failures – when La Senza, Hawkins Bazaar, D2 Jeans and Past Times filed for administration – indicates many vulnerable retailers are already fighting hard for survival.

Even before Christmas trading updates start to be published, Company Watch said its research can reveal the likely winners and losers in 2012.

Using the latest published financial statements and other public domain data for a number of well-known retail groups, the Company Watch health monitoring system produces so-called H-Score financial health assessments, which show the extent to which the retail market can be divided up akin to football teams competing in different leagues (see table below). 

Nick Hood, head of external affairs at Company Watch, said: “With so many negative pressures bearing down on consumer spending and the peak Christmas trading season now behind them, it is difficult to see how the more financially-fragile retailers will make it through the barren retail winter.

“Their bankers, suppliers, landlords and the trade insurers will all be focusing on which companies to support and how to mitigate their potential losses on the less fortunate retailers. Although the vast majority of retailers going under will be SMEs, we can expect further casualties among the high profile companies trading on public equity markets.”