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North East book and shoe shops face heightened instability risk

North East book and shoe shops have been highlighted as being the region’s most likely retailers to face financial difficulty in the next year, according to new research.

Over a third (34%) of the region’s shoe shops have a heightened risk of going insolvent in the next 12 months, compared to a national average of 24%, while the North East’s book stores are a similar distance (35% vs 24%) behind their competitors around the UK.

The findings come as part of insolvency body R3’s latest business stability rankings, which examine the fortunes of more than 3,100 businesses which make up the North East retail sector.

The overall proportion of regional retailers with a heightened risk of going insolvent in the next 12 months is broadly comparable to the 24% national sector average, but different kinds of shops in the region are having very different experiences.

Home furnishing stores and market stalls in the North East are performing better than their peers across the country, as are regional retailers who predominantly sell their goods online, while our clothing stores are performing roughly in line with the national average.

Elsewhere in R3’s business stability rankings, the North East’s pub and restaurant sectors each have the lowest risk of getting into financial difficulty in the next year of any such businesses anywhere in the UK, while the technology, transport/haulage, tourism operator and professional services sectors are all in a better position than their respective industries’ national average.

The region’s construction sector remains the least stable of any of the 12 regional peers across the UK, while the region’s manufacturing, hotel and agriculture sectors are all faring worse than their respective national averages.

Overall, just over a quarter (27%) of all North East businesses have a heightened risk of entering insolvency in the next year, which is the same as this month’s cross-sector national average.

R3’s insolvency risk tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.

Neil Harrold, chair of R3 in the North East and a partner with Hay & Kilner Law Firm, says: “The regional retail sector employs many thousands of people, and its fortunes can also give an indicator of how well the wider North East economy is performing, as people are more likely to be spending more if they’re feeling confident about their personal financial position.

“While the picture is mixed, there are some encouraging regional stories to report, and as we move into the second half of the year, where retail sales are traditionally stronger, we would hope to see the picture improving even further.

“Any business in any sector can run into financial difficulties at any point, and it’s essential for management team to take action if they can foresee trouble brewing down the line, rather than just putting their heads in the sand and simply hoping everything will turn out for the best.”

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