There is no denying that the double dip recession has had a severe impact on British businesses. Companies from sectors such as the leisure industry and the professional services industry have seen budget squeezes, falling client numbers and even cuts to staff members in order to keep the business ticking over. However, it is arguably the retail industry that has suffered the most in the past four years, with many big name brands having to cut their losses by entering administration, leaving increasing numbers of unoccupied commercial properties on our high streets.
Fortunately, figures released this week indicate a turning of the tide for retailers, hinting that the toughest part of the financial crisis may be behind them.
Accounting firm Deloitte claims that administrations of retail groups has fallen 15 per cent when compared to the same time last year, having dropped from 33 to 28. The reason, the firm believes, is all down to lower inflation this year. As disposable income slowly begins to crawl back up, consumers do not feel the need to frantically save and thus begin to spend again, providing a welcome boost to both the retail sector and the economy overall.
While it may be too late for retail businesses such as Clinton Cards, Aquascutum and JJB Sports, all of whom entered administration this year, this news will hopefully help in buoying the spirits of large retail chains currently worrying about the future.
Many businesses have chosen to implement new initiatives aimed at drawing in customers who are still hesitant about splashing the cash. For example, last month retail giants Debenhams launched their new line of stock with a sale – something that, in more affluent years, was unheard of. Sales are usually reserved for the end of seasons in order to make room for new ranges, yet are becoming increasingly popular within high street brands at all times of the year in order to keep business ticking over.
Yet Deloitte warn that, while these figures are certainly encouraging, retailers must be wary about launching into sales too enthusiastically in a bid to encourage a spending frenzy amongst shoppers.
A spokesperson for the accountants said; “The real test will come in January. Forecasts for the festive period are mixed. The challenge will be for retailers not to discount too quickly or too deeply to ensure they generate sales at acceptable margins in order to provide a stable platform for trading into 2013.”
The message for retailers, then, is to exercise caution when implementing sales techniques, as a sudden sales boom may not necessarily continue on into the New Year. Focusing on consistent good value prices may well be the aspect of your business that encourages repeat custom well into the future.
Deloitte added to their run of good news by highlighting that overall business administrations are on the downturn, pointing to a positive future for the UK economy.
In the third quarter of 2012, 395 companies were forced to enter administration across all industries operating within the country. This may seem high, but considering that in the same period in 2011 business administrations totalled 524, it is definitely a step in the right direction.
With cautious optimism, then, it appears that the UK economy is on the right track to recovery. While it may not be an overnight fix, retailers and business leaders must surely be breathing a sigh of relief after four long years of uncertainty.
Do you think that these figures show the UK to be recovering from the financial crisis? What other steps could the country take to encourage the positive signs released this week?
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