Industry analysts warn that rising labour costs and widespread thievery could force more fashion companies to undergo restructuring in early 2025, despite the apparent stability in UK retail insolvencies.
According to available data, retail trade insolvencies stayed essentially the same, with 2,089 companies going bankrupt in the year ending in September 2024 as opposed to 2,101 in the preceding 12 months. There was also no change in the monthly data, with 138 insolvencies in September compared to 137 in August.
However, after the Chancellor’s recent presentation of the Budget, the fashion retail industry is facing previously unheard-of challenges. Given their historically high staffing needs across store networks, fashion retailers are predicted to be especially adversely hit by the combination of higher employers’ National Insurance contributions and a notable increase in the National Minimum Wage.
For fashion shops, who usually make up to 40% of their yearly revenues during the Golden Quarter, the timing could not be more crucial. According to industry observers, companies who are already running on extremely low margins may find that their poor Black Friday sales prove to be fatal.
The difficulties facing the industry are made worse by an unparalleled increase in retail crime, which has doubled since 2019, according to the British Retail Consortium. Because organised crime groups are increasingly targeting high-value items, this trend is especially dangerous for fashion merchants.
Industry watchers note that mid-market companies are most at risk, even though luxury fashion outlets have proven resilient. Rising operating costs, theft-related shrinkage, and possible customer belt-tightening might make things especially difficult for this market, which has already seen a number of high-profile casualties recently.
These challenges emerge as the industry struggles with the structural shift towards online purchasing, which necessitates expensive physical store estates and significant investments in digital infrastructure. According to analysts, the current stability in insolvency rates could only last a short while if there is no substantial government action or a noticeable increase in consumer confidence.
