Retailers face collapse as costs soar and High St distress levels soar 25% after budget

A wave of chain stores and independent businesses look set to collapse in the coming months as they are hit by spiraling costs following the budget.

In a further sign of the crisis on the High Street, insolvency specialist Begbies Traynor said 2,124 retailers were in “critical financial difficulty”, up 25 per cent on the previous quarter, according to the group’s Red Flag Alert report.

The alarming figures came a day after the Mail reported that more than 8,500 stores had closed this year with the loss of 130,000 jobs. Industry experts warn the worst is yet to come in 2025 as the sector faces a £7bn rise in the cost of doing business following the Budget.

The latest figures include a 29 per cent rise in the number of general retailers in “critical financial difficulty” and a 17 per cent rise for food and drug retailers.

Dismal Boxing Day sales also added pressure on the High Street, as the number of shoppers visiting stores fell 4.9 per cent on last year, MRI Software said.

Julie Palmer, partner at Begbies Traynor, said the sector remained “under significant pressure”, with pressure exacerbated by Labor budget measures such as higher wages and National Insurance payments.

This will “significantly increase the challenge faced by these companies”, he said, adding: “Consequently, we expect elevated levels of insolvencies across this sector during 2025.”

Much of the blame falls on Chancellor Rachel Reeves, who broke Labour’s manifesto commitment not to raise taxes with a £25 billion increase in employers’ National Insurance contributions, while pushing for a pay rise. minimum to end inflation.

It has failed to reform the business rates regime plaguing the High Street, an issue highlighted by the Mail’s Save Our High Streets campaign, backed by household names such as B&Q and Currys. Retailers such as HMV and The Entertainer have already said they will not open new stores due to higher tariffs next year.

Andrew Goodacre, director of the British Association of Independent Retailers, spoke of “scary figures that will only get worse next year with increases in business rates”, adding: “It must be clear to the government that trading companies need lower costs, not higher, Otherwise we will see even more hollow main streets.’

Business rates are a tax based on the rental value of a property, meaning stores pay a premium compared to online giants like Amazon. Ahead of the Budget, business owners called on the Chancellor to extend Covid-era relief plans, which cut business rates bills by 75 per cent.

But in a blow to retailers, Reeves reduced this to 40 per cent. And the proposed reforms have been criticized for not going far enough to help retailers.

James Lowman, director of the Convenience Stores Association, said this would be felt “most significantly by those on the High Street and those who run larger convenience stores and petrol stations”.