The number of retailers in Birmingham experiencing financial difficulty fell in the final three months of 2014, according to the latest Red Flag Alert research into corporate distress levels from business recovery firm Begbies Traynor.
Between October and December last year there was a five per cent drop (244 to 233) in the number of general retailers in Birmingham classed as suffering from significant financial distress.
However, for many businesses Christmas came too late. Year on year in Birmingham the number of shops in significant financial distress rose by 62 per cent (144 to 244), as the ongoing price war between the major supermarkets and German discounters continued to take its toll on smaller businesses.
Looking specifically at food and drug retailers in Birmingham, there were sustained quarterly and annual increases in the number in significant financial distress.
Between the third and fourth quarters of 2014 the number of businesses experiencing problems rose by 34 per cent (80 to 107) and between the final quarters of 2013 and 2014 there was an 88 per cent rise (57 to 107).
The battle for retail dominance is also causing pain for suppliers. In Birmingham the food and beverage manufacturers in significant financial distress saw a 57 per cent rise (7 to 11) in the final quarters of 2013 and 2014, whilst annually there was an 83 per cent increase (6 to 11).
The local trend also reflected the national picture, where there was a four per cent final quarter drop (18,471 to 17,781) in the number of general retailers classed as experiencing significant financial distress. Annually this sector witnessed an increase of 36 per cent (13,051 to 17,781).
Across the Midlands region, there was a 31 per cent drop (16 to 11) in the number of general retail businesses in the more serious category of critical financial distress between the fourth quarter of 2014 and the same period in 2014. In food and drug retailing distress levels remained broadly flat.
John Kelly, regional managing partner at Begbies Traynor’s Birmingham office, said retailers faced a tough challenge due to changing consumer habits.
He said: “Whilst the run-up to Christmas 2014 brought some relief to hard-pressed retailers, the fact is the sector is experiencing unprecedented changes in the way people make their purchases.
“Online retailers, which we all know are experiencing phenomenal growth, are using their reduced overheads to keep prices low and that is determining consumer behaviour and hitting those with traditional retail space.
“As for food retailers, the German discounters have massively disrupted the UK market, bringing us cheap food like we’ve never seen before, and creating a classless shopping experience as people of all backgrounds are buying their groceries from them.”
Mr Kelly added: “There’s a huge amount of uncertainty around the long-term effects that the changes in consumer habits will have on the food retail sector.
“Despite the economic recovery, people have become wedded to buying their weekly groceries from Aldi and Lidl. And one thing’s for sure - it’s going to take a lot to persuade many British consumers to pay more for their food.”
