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Heavy debt burdens and weak online offerings set to be key factors in next wave of retail insolvencies

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Insolvency and recovery specialists Begbies Traynor have reported a dramatic surge in the number of retailers with critical financial problems. During September 2009, the company’s Red Flag early warning system identified 125 retail companies encountering critical problems, up 37% from August and the average for the previous three months.

Begbies Traynor expects a significant number of those 125 companies to enter into formal insolvency procedures within a year.

“With unemployment set to continue rising for many months and consumer confidence remaining extremely fragile, many struggling retailers are threatened with a Christmas that may be even worse than last year, when 15 major national and retail chains failed,” says Nick Hood, senior London partner at Begbies Traynor.

“Despite the shake out that has already seen many thousands of shops boarded up with no prospect of being re-opened any time soon,” he added, “the latest Red Flag figures are bad news and suggest that Christmas 2009 could see just as many retail casualties as last year, affecting particularly those businesses with heavy debt burdens, any with weak online offerings and those reliant on discretionary, non-essential spending.”

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