The UK retail sector is facing mounting insolvencies, with 72,625 businesses (15% of the total retail population) now technically insolvent, with negative net assets on their balance sheets, according to analysis by Price Bailey, a Top 40 accountancy firm with offices in Cambridge and Norwich.
Of the 72,625 technically insolvent retail businesses, over half (37,332) fall into the Maximum Risk category according to their Delphi credit risk scores making them at imminent risk of closure. This marks a 14% increase from 12 months ago, when 32,759 retail businesses were in the same high-risk category.
Price Bailey says that these businesses are at a heightened risk of cash flow insolvency where they are unable to meet financial obligations to suppliers or lenders. Businesses deemed Maximum Risk will find it difficult to access funding without personal guarantees from directors and are likely to be subject to winding up petitions or intention to dissolve notices in the next 12 months.
According to Price Bailey, a convergence of adverse factors hit the retail sector in April, squeezing business owners:
- The rate of employer National Insurance Contributions rose from 13.8% to 15%, and the threshold for the tax being levied was slashed from £9,100 to £5,000 a year
- Consumer Prices Index (CPI) inflation increased to 3.5% in April 2025, up from 2.6% in March
- The National Living Wage (NLW) for workers aged 21 and over increased to £12.21 per hour, up from £11.44 - a 6.7% increase. For workers aged 18 - 20 NLW increased to £10.00 per hour (up 16.3%)
Regional hotspots of retail distress
The data goes on to reveal that London has the highest number of technically insolvent retail businesses, with 23,268 companies showing negative net assets. Of these, 12,438 are in the Maximum Risk category - more than any other region.
The South East and North West follow, with 9,541 and 7,718 technically insolvent businesses respectively. In both regions, half of these are considered Maximum Risk, indicating widespread financial fragility.
Further data obtained previously by Price Bailey has shown that the retail sector will face an added £5bn in labour costs in 2025. Consumers will feel the squeeze too, with 67% of the sector expecting to raise prices and 25% set to delay store opening times to reduce employee costs.
According to Price Bailey, 1 in 10 part-time jobs are now at risk and almost half (44%) of the sector expect to see a reduction in profits in 2025.
Adam Norman, Partner and Retail sector specialist in the Corporate team at Price Bailey, comments: “The early signs are that the tax and minimum wage hikes which took effect in April are already tipping some struggling retailers over the edge.”
“More than one in 10 retailers are technically insolvent and at imminent risk of collapse. These businesses will find it almost impossible to access extra funding unless the owners provide personal guarantees, which few are likely to do in the current climate.”
Matt Howard, Partner and Head of Insolvency and Recovery at Price Bailey, also comments: “The retail sector is suffering from deep-rooted structural issues brought on by prolonged margin compression, rising input costs, and a consumer base still reeling from inflation and interest rate hikes. Many retailers will struggle to absorb April’s cost increases onto their balance sheets but will find it difficult to pass those costs onto consumers.”
“Delphi Risk scores are forward-looking, so this signals a growing cohort of retailers teetering on the edge - many of whom may already be locked out of credit markets or facing creditor pressure. Many are zombie businesses, surviving only through deferrals, forbearance, or director guarantees.”
"Struggling retailers should consider early engagement with creditors and a reassessment of cash flow forecasts under multiple stress scenarios. The April cost increases - particularly wage and tax-related - have materially altered the risk landscape, and boards need to ensure their financial statements reflect that reality."
