The UK retail sector is navigating a mix of challenges and opportunities as 2024 draws to a close, according to Atradius, a trade credit insurer.
The company has reported significant increases in late payments and insolvencies across specific retail categories but has noted the sector's ongoing efforts to adapt to economic pressures.
Atradius data for Q3 2024 revealed notable rises in payment defaults within retail supply chains. Domestic appliance firms experienced a 450% increase in payment defaults compared to the previous year.
Meanwhile, defaults in manufactured leisure articles rose by 60%, while consumer durables saw a 28% increase. Atradius says that these figures reflect the pressures faced by businesses in the retail industry amid a challenging economic environment.
Despite these setbacks, the sector has reported modest growth. Retail sales volumes rose by 1% in August 2024 and by 0.3% in September 2024. These figures provide some optimism ahead of the busy festive period, including Black Friday, which generated £1.4 billion in online sales in 2023.
Atradius noted that retailers are preparing to leverage the holiday season to secure critical revenues as they enter Q1 2025.
The Autumn Budget 2024 introduced measures with implications for the retail industry. Business rates relief was extended for another year, while increases in the National Living Wage aim to boost consumer spending.
However, rising supply chain costs, higher Capital Gains Tax, and increased employer National Insurance contributions may pressure the profit margins of small and medium-sized enterprises (SMEs).
Shop closures remain a concern for the sector, the report finds. Nearly 7,000 retail outlets have closed across the UK this year, averaging 38 closures per day. High-profile insolvencies, including those of Ted Baker, The Body Shop, and Homebase, highlight the importance of financial planning and safeguarding for businesses in an unpredictable market.
Retailers are also exploring innovative approaches to meet changing consumer expectations. Hybrid shopping models and AI-driven customer experiences are becoming more prevalent. According to recent surveys, 74% of UK consumers consider customer service a critical factor in brand loyalty, while 48% are willing to pay a premium for higher service quality.
Ruby Hartery (pictured above), senior underwriter at Atradius UK, said that adaptability will be essential for retailers heading into 2025.
“Enhancing customer service, ensuring transparency, and leveraging seasonal opportunities like Black Friday will be vital. While challenges remain, increased consumer confidence and strategic financial planning will help retailers thrive in the new year,” Hartery said.
Atradius noted that the retail sector’s outlook for 2025 will depend on its ability to balance government policy impacts, shifting consumer demands, and the adoption of new technologies.
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