Struggling Retail Industry Suffers Worst Year On Record

As consumer spending continues to fall, it is vital companies doing business in the retail sector take steps to protect their own position and closely monitor cash flow management.

It comes after 2019 was named as the worst year on record for UK retail. Reduced high streets sales were the primary reason for the poor performance of the industry, highlighted by a 0.9% slip in sales for November and December.

According to a report from British Retail Consortium (BRC) and KPMG the total number of sales for British retail dropped by 0.1% for 2019, which is the lowest amount since the monitoring of retail sales first began in 1995.

The report shows that consumers are being more cautious when it comes to retail spending, particularly in-store. Consequently, the lack of spending is having an impact on the cash available to the retail sector. It is therefore important that anyone doing business in the retail sector takes steps to protect their own position.

Similarly, the UK high street looks set for a slow start to 2020, with little evidence of an increase in in-store spending, or in confidence returning to previous levels.

Christmas 2019 retail trading reports

Over the past few weeks, retailers have been releasing their Christmas trading reports, with the likes of Next, Tesco, Aldi and Lidl recording strong festive results. However, John Lewis, M&S, Sainsbury’s and Morrisons had a tough Christmas with significant falls in retail sales.

The stores that have reported rises in in-store sales over the Christmas season were the more modest and more affordable stores. This demonstrates how customers are being savvier and avoiding excessive spending.

While reports do show an increase of 2.6% in November and December in online shopping, which is largely down to a change in consumer shopping habits, there is considerable nervousness in the market and consumer confidence remains low.

Business cash flow management

With retail, as with most business sectors, cash flow management is the key to businesses surviving. Our Debt Recovery team have seen success for a number of our clients in ensuring that they are ‘at the front of the queue’ where securing payment is concerned. The steps businesses need to take to help guard their position will depend on where they are in the supply chain. However, there are similar, basic things companies can start by doing.

Having tight contractual terms and conditions from the outset is important, as is setting and sticking to defined credit limits. Each business will be different, so its vital that specialist advice is always sought so it can be tailored to your specific circumstances.

Business cash flow managementHow Nelsons can help

Simon Key is a Partner in our Commercial Dispute Resolution team.

For further information or to comment on this article, please contact Simon or another member of our team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.