Credit insurance firm Atradius has downgraded the retail sector’s performance outlook for the year ahead from ‘fair’ to ‘poor’.
Atradius has warned that economic and political uncertainty, sluggish sales growth and weak consumer confidence have hampered the sector’s 2019 outlook.
The credit insurer said factors including the increased cost of raw materials in furniture retailing, lack of innovation and longer product lifecycles in electricals, and poor buying patterns and import costs across fashion and footwear have also all hindered the sector’s performance.
Atradius forecast that after an 86% surge in the number of CVAs undertaken by retailers last year, the number of CVAs will rise a further 5% this year to 2,730.
Atradius head of underwriting Simon Rockett said: “The retail sector has several factors working against it: high economic uncertainty, lower-than-expected GDP growth, a fall in consumer confidence and low sentiment.
“Uncertainty linked mainly to Brexit has hampered consumer spending as well as slowing business investment, creating tougher trading conditions. The subsequent slump in sales and postponement of investment decisions has ramifications for large and small retail businesses alike; the industry is undergoing a period of correction and those who fail to adapt will face serious trouble.”
So far this year, retailers including Arcadia, Debenhams, Cotswold Outdoor, Monsoon and Paperchase have mulled using CVAs in a bid to cut costs and exit unprofitable stores.