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 – £179bn (2024 £214bn and pre-pandemic £240bn)
- Total Debt – £25bn (2024 £28bn and pre-pandemic £70bn)
- Total Net Worth – £61bn (2024 £77bn and pre-pandemic £84bn)
Current & 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 an impact on UK retailers.
Cyber security
The Scattered Spider attacks on M&S, the Co-op and Harrods have shown why cyber security must be taken extremely seriously. M&S has estimated that the cost for them (net of insurance recoveries) was at least £300m, while Co-op reported the impact was £200m in lost sales and an £80m hit to profits. These have been the most high-profile cyber attack victims, but many other retailers have been hit.
Consumer confidence
Confidence among UK consumers has taken a hit according to the GfK Consumer Confidence Index. The data shows that sentiment fell by two points (10%) in September 2025 and remains firmly in negative territory at -19.
2025 Autumn Budget cost increases
Last year’s Autumn Budget is said by the British Retail Consortium (BRC) to have imposed additional costs of £7bn on UK retailers and been the major factor in a fall of 93,000 in retail employment between March 2024 and when the Budget measures came into effect at the beginning of April 2025.
Now the concern is, what further measures might be introduced in the 2025 Autumn Budget, which might affect either retailers or their customers? Not long until we find out, with the Budget scheduled for the end of November 2025.
Business rates
From April 2026, further reforms are due to be implemented. This will have the effect of transferring costs from smaller retailers to the larger outlets and has prompted the BRC to warn that up to 400 major retail outlets are at risk of closure as a result, with the loss of a further 100,000 retail jobs.
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 between April 2024 and March 2025 (25.5%)
- 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, who have endured the chaos of Brexit, the pandemic and the fallout from the Ukraine war. Now there are understandable concerns about the potential impact of the chaotic trade war as well as ongoing 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 cause much head scratching and will require not just considerable investment, but a high degree of operational flexibility and agility. There is a real risk that the huge cost of implementing these technologies will divert investment away from maintaining and improving other vital aspects of retailing.
Global e-commerce, UK retail disruption
International e-commerce giants like Amazon, Temu and Shein are likely to increase their disruption of the UK retail scene in 2026 and beyond. These platforms are predicted to claim a significant portion of the market, 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.
To have any chance of competing, UK retailers will need to continue to embrace digital transformation, streamline their delivery services and/or explore exclusive products/services, market positioning and messaging that set them apart from these international giants.
Financial risk
We have used the Company Watch financial health monitoring system once more 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 143,184 companies.
Overall financial health
At the end of the pandemic in October 2022 the average financial health rating (H-Score® – see below) 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 is at 36. The average H-Score for the whole UK economy 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 – H-Score
Company Watch uses complex analytics to generate an H-Score for every company out of a maximum of 100. This is based on its latest published accounts and various key ratios within those accounts. An H-Score of 25 or less 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.
Out of our sample of 143,184 companies, 64,223 or 45% (August 2023: 43%) are in the Company Watch warning area with an H-Score of 25 or less. We broke down our results according to the size of each company. For smaller businesses with:
- Total assets between £50k and £124k, 44% were in the warning area (40% in August 2023).
- Total assets between £25k and £49k, 50% 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 financially 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 19,782 (14%) retail zombies with a combined excess of liabilities over their assets of £3.1bn. It remains worrying that one in seven retailers has filed a balance sheet, which is technically insolvent by one of the standard definitions.
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 23,544 (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%). Since then borrowings have come down by a further £3.4bn (12%).
Looking at the sector according to size of company, this reduction has been heavily focused among the largest retailers with assets of £1m of more, but every other size category has also 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 and are currently plateaued at around 25,500. Retail failures are running at 8% of corporate insolvencies, with 1,801 retail companies in England & Wales filing for insolvency in the twelve months to July 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 picture for 2024 showed relatively fewer but larger retailers failing than previously, 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 the first pandemic year of 2020 and the Woolworths year of 2008 as the global financial crisis gathered pace).
The statistics for the first eight months of 2025 show that 30 major retailers have failed, almost the same number as for the whole of 2024. By comparison, these are mainly smaller groups, so that only 2,681 stores and 27,124 employees have been affected – 35% and 49% respectively of the 2024 equivalents. However, it remains to be seen whether and when the cost hikes from the 2024 Autumn Budget which came into effect in April 2025, combined with continuing cost of living pressures and geopolitical events will start to take a toll of more of the larger retail groups.
Conclusion
Retail finances remain fragile as the sector shrinks in financial terms, with almost all key indicators significantly worse than two years ago. There are multiple and persistent challenges, which threaten both profitability and viability across the industry. Retailers will need to be nimble, agile and disciplined through the rest of this year and into the quieter months after the festive season.
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 Directors or Partners who can discuss options with you.
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