Market Characteristics
Retail Economics have identified the following key data points for 2024:
- Total value of UK retail sales was £468bn (2023: £462bn)
- People employed in UK retail were 2.8m (2023: 2.9m)
- Proportion of consumer spending that goes through retail is 1/3 (same as for 2023)
- Percentage of retail sales made online was 27.1% (2023: 26.6%)
- Growth in UK retail sales value was 1.5% (2023: 5.2%)
- Total number of VAT-registered retailers in the UK were 214,615 (2023: 217,000)
- Total number of retail outlets in the UK was 302,600 (2023: 306,340)
- Retail generates 6% of total GDP (same as in 2023)
- Online retail sales rose by 3.2% in 2024, compared to growth between 2019 and 2022 of 73%
Our latest research using analytics provided by financial health monitoring specialists, Company Watch shows the following overall financial characteristics in June 2025:
- Total assets employed – £187bn (2024 £214bn and pre-pandemic £240bn)
- Total debt – £27bn (2024 £28bn and pre-pandemic £70bn)
- Total net worth – £64bn (2024 £77bn and pre-pandemic £84bn)
Current and future challenges
UK retailers face a worrying number of major issues, both now and in the foreseeable future. These include:
Geopolitics
Whether it is concerns about terrorism reducing inbound tourism or tariff wars affecting supply chains, input costs and profit margins, the current febrile state of international politics is bound to have a detrimental effect on UK retailers.
Cyber security
The Scattered Spider attacks on M&S, the Co-op and Harrods has shown other retailers why they need to take cyber security extremely seriously. The worst hit, M&S has estimated that the cost for them (net of insurance recoveries) will be at least £300m. Its website is still not fully operational more than two months after the initial attack.
Consumer confidence
Confidence among UK consumers has improved recently but remains fragile in the face of possible petrol price rises amid escalating conflict in the Middle East, as well as fears of inflation from US tariffs, according to the latest polling by GfK. The data shows that sentiment improved by two points in June 2025 but remains in negative territory at -18, well below the -12 of a year ago.
Autumn Budget cost increases
In the immediate aftermath of the Budget, 79 major retailers wrote to the Chancellor to set out its likely impact on the sector, highlighting an estimate of £7bn for the extra costs it would impose and suggesting that the prediction of 50,000 retail job losses by the Office for Budget Responsibility was an underestimate. The extra costs started to hit retailers from the beginning of this April and have already materially affected price levels, profit margins and staffing levels.
Business rates
In the Autumn Budget, the Government reduced business rates relief from April 2025, which is hitting small retailers hard. The Chancellor extended certain reliefs but cut the small premises discount from 75% to 40%. Without the continuation of the current reliefs, which would have expired in March 2025, the rates bill for smaller premises would have quadrupled. Now, they have only doubled.
From April 2026, further reforms are due to be implemented, which will have the effect of transferring costs from smaller retailers to the larger outlets but not reducing the unfair overall burden on bricks and mortar retail businesses.
Staffing and the Employment Rights Bill
The turmoil in all staffing aspects of retail is well illustrated by statistics released in June 2025 by the British Retail Consortium, confirming that:
- The retail sector has shed 364k jobs in the past decade
- 93k jobs were lost in 2024
- 246k part roles have been eliminated since 2015
The BRC also released its Retail Jobs Report in June 2025, highlighting the operational and cost issues that retailers will be faced with as a result of the Employment Rights Bill.
Supply chain disruption
Supply chain disruption threats are hardly any news to retailers, having endured the chaos of the pandemic and then the fall out from the Ukraine war. Now there are understandable concerns about the potential impact of the trade war launched by America and of the escalating tensions in the Middle East.
Technology
AI is permeating every aspect of every business, either invited in by business owners or forcing its digital way into how they run their companies. In a sector so reliant on the customer experience, utilising this technology without lessening or de-humanising the relationship with shoppers will require not just considerable investment and time, but a high degree of operational flexibility and agility.
Global ecommerce platforms
International ecommerce giants like Amazon, Temu and Shein are likely to disrupt the UK retail scene even more. These platforms are expected to claim a significant portion of the market in 2025 and beyond, potentially reaching up to 10% of UK retail sales. Their ability to offer lower prices, faster shipping and a more extensive product range gives them a competitive edge that UK retailers will need to contend with. US tariffs may be the only threat to their increasing penetration of the UK market.
To compete, UK retailers will need to continue to embrace digital transformation, streamline their delivery services and regularly explore products or services that set them apart, identify how to best market those differentiators, and really target and hold onto that ideal audience.
Financial risk
We have used the Company Watch financial health monitoring system to analyse the latest financial statements filed at Companies House for every company registered in the UK, which claims that it operates in the retail sector. Our research covered a total of 142,890 companies.
The system uses complex analytics to generate an H-Score® (financial health rating) for every company out of a maximum of 100. This is based on its latest published accounts and a number of key ratios within those accounts. An H-Score of 25 or less is known as the Warning Area and indicates that the company concerned has a one in four risk of going through a formal insolvency process or a significant financial restructuring at some point during the next three years.
Overall financial health
At the end of the pandemic in October 2022 the average H-Score for the sector stood at 40 out of a maximum of 100. It had fallen to 37 by August 2023 and stayed there until late last year. In our latest analysis, it has dropped to 36. The average H-Score for the economy as a whole is around 48.
Looking at the different size ranges for retailers (as measured by total assets), the health rating for the larger retailers (those with assets of £1m+) has come down from 62 in August 2023 to 58 now. By contrast, there has been a marginal improvement in the rating for the very smallest micro-entity retailers with assets of less than £25k, which has risen from 28 in August 2023 to 29 now. These movements are small but significant given the challenges facing the sector.
Failure risk
Out of our sample of 142,890 companies, 63,960 or 44% (August 2023: 43%) are in the Company Watch warning area with an H-Score of 25 or less. We broke our results down according to the size of each company. For businesses with:
- Total assets between £50k and £124k, 44% were in the warning area (40% in August 2023)
- Total assets between £25k and £49k, 49% were in the warning area (47% in August 2023)
- Total assets below £25k, 57% are at serious financial risk (58% in August 2023)
Even with the major, more robust retailers there is a higher percentage at risk – 22% now vs. 18% in August 2023.
Across the whole economy, some 19% of all companies are in the Warning Area, which highlights how vulnerable the retail sector is to business failure.
This research confirms that while there are some large retailers with serious financial issues, the vast bulk of financial risk in the sector lies with the smaller, less well capitalised businesses.
Zombie companies
We also identified any ‘zombie’ companies with negative balance sheets (by at least a de minimis figure of £20k). There were 19,691 (14%) retail zombies with a combined excess of liabilities over their assets of £3.2bn. It remains worrying that one in seven retailers has filed a balance sheet, which is technically insolvent.
Negative working capital
We also looked at companies with negative working capital, where their liabilities falling due within a year were greater than their current ‘quick’ assets such as cash, inventory and receivables (again by at least £20k). We found there were 23,350 (16%) such retail companies. This too is a negative indicator for the financial health of the sector.
Debt
Debt levels across the sector continue to fall. There had been significant reductions between August 2023 and May 2024 (31%) and then again between May 2024 and November 2024 (37%). We commented on this in our previous retail report in November 2024. Since then borrowings have come down by a further £1.1bn (4%)
Looking at the sector according to size of company, this reduction is heavily focused among the largest retailers with assets of £1m of more, which have cut their borrowings by £1bn in just seven months, but every other size category has trimmed its debt.
A more detailed summary of our research can be found here.
Retail insolvencies
Last year saw an all-time peak in UK corporate insolvencies, when the rolling twelve-month figure reached 27,182 in February 2024. Since then failure levels have dropped back but are now rising once more. Retail failures are running at 8% of insolvencies, with 1,889 retail companies in England & Wales filing for insolvency in the twelve months to April 2025. It’s notable that the current failure rate is higher than the sector’s 6% share of GDP, confirming the higher risk factors for retailers.
Major retail failures
The Centre for Retail Research statistics cover the failure of major retailers in the UK. These figures capture the number of companies affected, as well as the number of retail stores and retail jobs put at risk. The data has been collected since 2007.
The picture for 2024 shows a different picture of relatively few but larger retailers failing, notably the four particularly high-profile failures of Homebase, Carpetright, Ted Baker and Body Shop all going into Administration. Overall, there were 34 major failures affecting 7,537 stores and putting 55,914 employees at risk. That was among the lowest number of failures since 2007, but the greatest ever number of stores and the third highest number of affected employees (after 2020 and the pandemic and the Woolworths year of 2008).
The statistics for the first four months of 2025 show very few insolvencies among major retailers. Just nine businesses have failed, affecting only 283 stores and 3,026 employees. However, it remains to be seen whether the cost hikes from the Autumn Budget, combined with continuing cost of living pressures and geopolitical events will start to take a toll of more of the larger retail groups.
Conclusion
This retail sector report shows that retail finances continue to deteriorate as the sector shrinks, with almost all key indicators coming out worse than even just seven months ago. Challenges abound, many of them demanding the judgment of Solomon to choose between higher prices, staff cuts or lower profits. What is certain is that retailers need to be on top of their game to get through the rest of this year and beyond. They will need to be nimble, agile and disciplined to deal with the many uncertainties they face.
If you would like to read our previous retail sector reports, click here.
If you would like to discuss any of the points in the report or believe you have been affected by any of these issues, you can speak to one of our Partners who can discuss options with you.
We have offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.