UK Retail Sector Report September 2026
William O’Brien Risk Underwriter – Credit wobrien@tmhcc.com
Summary Retail sales volumes have returned to February 2020 levels, but this recovery has been bought with price, with non-food prices flat for the past year despite rising costs. Total insolvencies are falling, but administrations – the procedure larger companies enter – are back at their pre-pandemic peak. Distress has moved up the size curve, towards bigger trade creditor balances. Brand-and-IP sales out of administration are now the standard outcome. Harvey Nichols’ unsecured creditors face no more than 15 pence in the pound. The economy grew 0.4% in July while consumer-facing output fell. Confidence is at a two-year high and hiring has turned, against Brent over $100 and freight rates up two-thirds since May.
Bank Rate has been held at 3.75% for five consecutive meetings, with three of nine members voting for a rise in July.
Retail employee jobs are at 2.63m, the lowest since 1997; youth unemployment is 16.2%.
The economy is doing better than the consumer, and the consumer better than our shops.
The Macroeconomic Environment Growth Holds, Inflation Turns Back Up The economy is growing slowly rather than stalling. Monthly GDP rose 0.4% in July1 after 0.3% in June, leaving output 1.6% higher than a year earlier. The composition is what matters for retail – the growth came from business services and manufacturing, while consumer-facing services fell 0.4% and retail trade 0.5%, giving back part of June’s rise. The economy is doing better than the consumer, and the consumer better than the shops. Inflation has stopped falling. CPI was 2.9% in July, up from 2.6% in June and 3.3% in March, while core inflation, which strips out energy, food, alcohol and tobacco and is the better guide to domestically generated pressure, held at 2.6%. The increase was driven by housing and household services, where gas prices rose by the most since October 2022. The source matters – the pressure is energy pass-through, not wages or demand.
UK Inflation and Bank of England CPI Target (y/y change in %)
10.0 9.0 8.0 7.0 y/y % change
6.0 5.0 4.0 3.0 2.0 1.0
CPI
RPI
July 2026
June 2026
Apr 2026
May 2026
Feb 2026
Jan 2026
Mar 2026
Dec 2025
Oct 2025
Nov 2025
Sep 2025
July 2025
Aug 2025
May 2025
June 2025
Apr 2025
Feb 2025
Mar 2025
Jan 2025
Dec 2024
Sep 2024
Nov 2024
July 2024
CPIH
Aug 2024
June 2024
Apr 2024
May 2024
Mar 2024
Jan 2024
Feb 2024
Dec 2023
Nov 2023
Oct 2023
Aug 2023
Sept 2023
July 2023
0.0
Bank of England CPI Target
Sources: ONS, Bank of England. Note: CPIH = CPI including owner occupiers’ housing costs and council tax. RPI is no longer a national statistic but still sets many commercial leases.
https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/july2026 ²https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/july-2026 1
3
A Conflict that Oscillates The reason the Bank cannot cut is external, and the shape of it matters more than any single reading. The Middle East conflict that began in late February has neither resolved nor settled. It escalated through the spring, de-escalated far enough in June for a peace framework to pull Brent back towards $79, and escalated again over the summer. Brent was around $100 in early September, roughly a third above its February level, with Hormuz transits erratic rather than either normal or halted. On six months’ evidence, alternation is more likely than resolution in either direction.
Monetary Policy: No Relief This Year The Monetary Policy Committee held Bank Rate at 3.75% on 29 July², its fifth consecutive hold, on a 6-3 vote in which all three dissenters wanted a rise to 4.0%. The Committee judged that the risks to inflation lay to the upside. For retailers the direction matters more than the timing – with three members already voting to tighten and energy costs still feeding through, any business with floating-rate debt or a working capital facility should plan on financing costs that do not fall this year.
² https://www.bankofengland.co.uk/monetary-policy-summary-andminutes/2026/july-2026
The oscillation is itself the cost. Each swing resets freight quotes, fuel prices and hedging assumptions, and none unwinds fully before the next arrives. Ofgem’s cap rises 4% on 1 October to £1,723 , and automotive fuel ran 15% to 23% y/y higher through the summer. Each of these channels reaches household budgets before it reaches retail sales, and each is harder to plan around when the direction of travel keeps changing.
The Consumer Against which, consumer confidence has improved markedly. The GfK index reached minus 14 in August4, its best in two years though still below its long-run average, with expectations for personal finances turning positive, and the saving ratio fell to 8.9% in Q1 from 9.6%.
30
25
20
15
10
5
Saving Ratio
Pre-pandemic Average
Sources: ONS. Notes: seasonally adjusted; the dashed line is the mean of the twenty quarters from Q1 2015 to Q4 2019, at 6.5%. The ratio measures saving as a share of total available household resources, so it rises when income grows faster than consumption and also when households choose to hold back.
4
Q1 2026
Q4 2025
Q3 2025
Q2 2025
Q1 2025
Q4 2024
Q3 2024
Q2 2024
Q1 2024
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Q4 2019
Q3 2019
Q2 2019
Q1 2019
Q4 2018
Q3 2018
Q2 2018
0 Q1 2018
Households' Saving Ratio (% of household resources)
UK Households’ Saving Ratio and the Pre-pandemic Average (% of household resources)
Households are spending a little more of what they earn. The OECD’s composite indicators put that recovery in a longer frame. Its UK consumer measure has climbed back to its long-run average, having spent 2022 and early 2023 well below it, while business confidence sits just beneath its own. Both are normalised so that 100 is the long-run norm, which makes the recent readings a return to ordinary conditions rather than a move into optimism. The tension between improving sentiment and a deteriorating external picture is the central uncertainty for the Golden Quarter. Confidence leads spending only loosely and is sensitive to headlines, and a higher energy bill and a Budget both arrive in October, inside the window in which Christmas trading is decided. July gave a first sight of the gap – confidence rose in a month when consumer-facing output fell.
UK Business and Consumer Confidence (index, long-term average = 100)
Index Value, Long-Term Average = 100
110
105
100
95
90
Composite business confidence
Jul 2026
Apr 2026
Jan 2026
Oct 2025
Jul 2025
Apr 2025
Jan 2025
Oct 2024
Jul 2024
Apr 2024
Jan 2024
Oct 2023
Jul 2023
Apr 2023
Jan 2023
Oct 2022
Jul 2022
Apr 2022
Jan 2022
Oct 2021
Jul 2021
Apr 2021
Jan 2021
Oct 2020
Jul 2020
Apr 2020
Jan 2020
85
Composite consumer confidence
Sources: OECD. Notes: amplitude-adjusted composite indicators normalised so that the long-term average = 100; readings above 100 indicate sentiment above its long-run norm. ³ https://www.ofgem.gov.uk/press-release/energy-price-cap-will-rise-4-october-2026 4 https://nielseniq.com/global/en/news-center/2026/headline-score-up-three-points-to-14-in-august/
5
Retail Sales: The Price of Volume
What the Categories Show Beneath the aggregate, the gap between categories widened through the summer. In the year to July, volumes of computers and telecommunications equipment were up 46%, furniture and lighting up 9.4% and alcoholic drinks 10.6%. Against that, audiovisual equipment was down 14.3% and footwear down 8.4%. The World Cup shows how little a major event now lifts sales. Alcohol was the clear beneficiary, and the ONS records producers, wholesalers and pubs citing the tournament for July turnover; in television, where retailers expected growth, the tournament only slowed a decline. Audio-visual volumes fell 18.1% y/y in March, with the rate of decline easing to around 9% in May and June before widening again to 14.3% in July.
Six months ago this report described a sector still below its pre-pandemic level of activity and waiting for demand to return. Demand has, in a narrow statistical sense, returned. The ONS reported retail sales volumes up 1.6% on the year in July 2026, with the more reliable three-month comparison showing growth of 1.1%5, and two months earlier volumes including automotive fuel rose above their February 2020 level for the first time since April 2022, a gain that was reversed the following month.
Computing is the genuine bright spot, driven by new capability rather than by households replacing ageing machines. Currys reports holding around three-quarters of the UK market for AIenabled laptops and delivered group like-for-like growth of 4% with adjusted pre-tax profit up 18%; AO World, which publishes no like-for-like measure, grew revenue 11.4%. Neither attributes its performance to replacement of pandemic-era purchases; both attribute it to share gains. In a market that is not growing, those gains come from smaller independents further down the same supply chains.
That milestone is fragile – it appears only on the measure including fuel, and the June figure was revised down within a month. Looking across the four-year time frame is the better guide. Since May 2022 retail volumes have averaged around 2.5% below their February 2020 level; retail spending per head has not recovered at all.
UK Retail Sales Volumes against the Pre-pandemic Level (index, 2023 = 100)
113.0 108.0
Index, 2023 = 100
103.0 98.0 93.0 88.0 83.0
Index (2023=100)
Jul 2026
Apr 2026
Jan 2026
Oct 2025
Jul 2025
Apr 2025
Jan 2025
Oct 2024
Jul 2024
Apr 2024
Jan 2024
Oct 2023
Jul 2023
Apr 2023
Jan 2023
Oct 2022
Jul 2022
Apr 2022
Jan 2022
Oct 2021
Jul 2021
Apr 2021
Jan 2021
Oct 2020
Jul 2020
Apr 2020
Jan 2020
78.0
Feb 2020 reference
Sources: ONS. Note: all retailing including automotive fuel, volume, seasonally adjusted; the dashed line marks February 2020 – the last full month before the first lockdown. Excluding automotive fuel, volumes have been above their February 2020 level throughout 2026.
5 https://www.ons.gov.uk/businessindustryandtrade/retailindustry/bulletins/retailsales/july2026
6
Prices Held, Costs Rose The volume growth has been achieved by holding down selling prices while costs rose, which shows up in the retail sales deflator. The ONS publishes retail sales twice6, once by value and once by volume; value is what shoppers spent, volume is what they carried out of the shop, and the gap between them is the implied price change. It is the best available proxy for what retailers are charging.
The clearest single illustration is Card Factory. In the year to January 2026, UK store like-for-like sales fell 0.2%, with transactions down 3.7% and average basket up 3.5%. The company absorbed £15m of National Insurance and wage-floor cost, and adjusted EBITDA margin fell 340bp to 20.0%. That is the mechanism at company level – fewer customers, a larger basket partly offsetting them, and a statutory cost increase absorbed in full.
Over the ten months to July, that implied price change never exceeded 1.6% in clothing, textiles and footwear and averaged under 0.7%, while household goods was negative for six consecutive months from October 2025. For food, the same measure held between 1.9% and 3.9%. Consumer price inflation for clothing and footwear says the same – negative in three of the past twelve months. The ONS attributed June’s 1.9% rise in clothing volumes to promotions pulled forward from July, which correspondingly hollowed out July. The industry has been discounting long enough that it has lost much of its power to move volumes. Set that against the cost side, where movement has been in the opposite direction. The British Retail Consortium calculates that employer National Insurance and National Living Wage increases added around £6.5bn to retail costs over fourteen months. The wage floor rose again to £12.71 in April 2026 and packaging levies landed in the same window. Container freight, near $2,700 per forty-foot box in late May, stood at $4,473 on 27 August.
Contributions to UK CPI Inflation by Category (percentage points and y/y change in %) 5.0
Percentage Points and y/y % change
4.0 3.0 2.0 1.0 0.0 -1.0
July 2026
May 2026
June 2026
Apr 2026
Feb 2026
Mar 2026
Jan 2026
Dec 2025
Nov 2025
Oct 2025
Sep 2025
July 2025
Aug 2025
June 2025
May 2025
Apr 2025
Mar 2025
Jan 2025
Feb 2025
Dec 2024
Nov 2024
Sep 2024
July 2024
Aug 2024
June 2024
May 2024
Apr 2024
Feb 2024
Mar 2024
Jan 2024
-2.0
Food and non-alcoholic beveragesRecreation and culture Furniture and household goodsClothing and footwear Other goods and services Housing and household services Alcohol and tobacco
Restaurants and hotels
Transport
Exploration & appraisal
Sources: ONS. Note: contributions to the CPI 12-month rate by COICOP division, which sum to the headline; ONS publishes twelve divisions and the four smallest – health, communication, education, and miscellaneous goods and services – are combined here as “Other goods and services”. 6 https://www.ons.gov.uk/businessindustryandtrade/retailindustry/datasets/retailsales
7
Where the Demand Went Footfall continues to decline, but the aggregate conceals a more important shift between destination types. On a three-month average, high street footfall was 4.4% below a year earlier in August, its weakest since early 2024, while retail parks were the only format above zero. The gap between the two, at five percentage points, is the widest in three years bar one episode in late 2024 that the BRC itself attributed to base effects.
UK Retail Footfall by Destination Type (y/y change in %, three-month moving average)
Year-on-year change, three-month average
6% 4% 2% 0% -2% -4% -6%
High street
Aug 2026
July 2026
June 2026
Apr 2026
May 2026
Feb 2026
Mar 2026
Jan 2026
Dec 2025
Nov 2025
Oct 2025
Sep 2025
July 2025
Shopping centre
Aug 2025
May 2025
June 2025
Apr 2025
Feb 2025
Mar 2025
Jan 2025
Dec 2024
Sep 2024
Nov 2024
Aug 2024
July 2024
June 2024
Apr 2024
Retail park
May 2024
Feb 2024
Mar 2024
Jan 2024
Dec 2023
Nov 2023
-8%
No change on a year earlier
Sources: BRC-Sensormatic, Note: three-month moving average ending in the month shown. March and April are replaced by the BRC’s own combined March-April figures to neutralise Easter timing. Figures are not seasonally adjusted.
Weather accounts for part of this, and the BRC attributed weakness in five of the eight months to August primarily to temperature or rainfall. It does not account for the pattern – retail parks have outperformed high streets in every month of 2026, and the current gap comes from high streets falling rather than retail parks rising. Online, meanwhile, is still gaining share but nothing like as fast as it once did. It accounted for 28.3% of retailing excluding fuel in July, against 27.5% a year earlier and a peak of 37.1% in February 2021. The divergence that matters more is between food and non-food. On BRC-KPMG figures, total retail sales rose 1.3% in July, with food up 3.8% and non-food down 0.7%, and non-food in-store sales down 1.9%. Food is supporting the headline, while non-food store retailing, where most trade credit exposure sits, continues to contract. The same split runs through the strongest operators. Next’s total full-price sales rose 9.2% in the quarter to 1 August, though that came from international online at 36.9% while sales in its shops fell 0.3%; M&S clothing store sales fell 2.3% in the year to March. M&S reports a 10.0% margin in stores against minus 5.2% online; the stores are where the margin is, and online is where the growth is. 8
3,500
40
30
2,500
25
2,000
20 1,500 15 1,000
10
500
5
Sources: ONS.
Apr 2026
Jan 2026
Oct 2025
Jul 2025
Apr 2025
Jan 2025
Oct 2024
Jul 2024
Apr 2024
Jan 2024
Oct 2023
Jul 2023
Apr 2023
Jan 2023
Oct 2022
Jul 2022
Apr 2022
Jan 2022
Oct 2021
Jul 2021
Apr 2021
Jan 2021
Oct 2020
Jul 2020
0 Apr 2020
0
Internet Sales as Proportion of Retail Sales excl. Automotive Fuels (Seasonally Adjusted)
35
3,000
Jan 2020
Average Weekly Internet Sales (Seasonally Adjusted, GBP Millions)
UK Online Retail Sales (share of all retailing excluding automotive fuel, %; average weekly internet sales, £ million)
Internet Sales as Proportion of Retail Sales excl. Automotive Fuels [RHS] Average Weekly Internet Sales (GBP Millions) [LHS]
Note: both series are seasonally adjusted and cover all retailing excluding automotive fuel, so the share shown is of non-fuel retail sales rather than of total retail sales.
Younger consumers say they prefer experiences to goods – 54% of 18 to 34 year olds in Opinium’s August survey – but card data shows travel spending down for five consecutive months to July while pubs and bars are up 10%, so the money is going to nights out rather than holidays.
9
The Open Door on Low-Value Imports A note on the transmission mechanism
The United Kingdom grants full relief from customs duty on any imported consignment worth £135 or less. VAT is charged, so this is not a tax loophole. It is a duty and compliance loophole – a UK retailer importing a container of clothing pays the tariff, files the declarations and carries the compliance cost, while an overseas seller posting the same garment to the customer’s door pays neither. HMRC estimates around 600m such consignments entered the UK in 2024, about 1.6m a day, with declared value of £5.9bn in 2024-25, and says the true value is higher. Duty-free, compliance-light parcels set the visible price point in clothing, footwear, homewares and small electricals, precisely the categories where the UK deflator has sat at or below zero for a year. A domestic retailer facing a competitor with a structurally lower landed cost cannot pass its own rising costs through without losing volume, so it absorbs them. That absorbed cost first shows up as lower profitability, then as difficulty meeting bank lending conditions, and ultimately as insolvency. The policy is changing, but slowly, and the UK is last in the queue. The US suspended its de minimis in August 2025 and the European Union replaced its €150 (about £1307) exemption with a flat €3 (about £2.60) per-item duty on 1 July 2026, moving to a full tariff classification in 2028 8. The UK announced removal of the £135 relief at the Autumn Budget 2025 and published draft legislation in July 2026, but commencement is only “by October 2028 at the latest”. The evidence that closing the door works arrived in September. Shein listed in Hong Kong on 1 September 2026 9 at a market value of roughly $26.5bn (£20bn), about a quarter of the $100bn (£74bn) it commanded privately in 2022. The markdown reflects margin rather than demand. Revenue still grew 8% in 2025, to $41.8bn (£31bn), while net income fell 39% and the first quarter of 2026 swung to a loss as the United States and the European Union closed their exemptions. Shein expects European change to hit it as hard as the US change did, and has told investors it will raise prices. That is the shape of the relief UK retailers can expect – the competitor remains in the market, but its cost advantage is taxed away and its prices rise. On the current timetable that happens here around two years after it happens in Brussels, so UK retailers face two further peak trading seasons against a price point their own cost base cannot meet.
7 Sterling equivalents at Bank of England spot rates on 9 September 2026, $1.3563 and €1.1644 to the pound. 8 https://taxation-customs.ec.europa.eu/news/guidance-and-legaltext-temporary-flat-fee-low-value-imports-which-will-apply-until-1july-2028-2026-06-08_en 9 https://www.hkex.com.hk/News/NewsRelease/2026/260828news?sc_lang=en
10
Divergence Across the Sector At the value end of the market, the discounters are having a worse year than a cost-of-living squeeze would suggest. B&M’s UK like-for-like sales were flat in the year to March 2026 and down 2.3% in the following quarter while its French business grew 5.3%, which isolates the problem as a British one of cost base and footfall rather than a failure of the discount model. Poundland, sold for £1 in 2025, disclosed an £85.2m pre-tax loss and a £60m overstatement of prior-year revenue in August, and its owner launched an auction in early September. Shoe Zone’s first-half revenue fell 12%. These are businesses with estates concentrated in the town centres where footfall is falling, and with a high proportion of staff paid at or close to the wage floor. At the aspirational end, trading down is real but it is not a simple story of luxury losing to the midmarket. Bain puts global personal luxury goods at €358bn in 2025, down 2%, with 2026 growth of 2% to 4% forecast, which is stabilisation rather than recovery. Coach grew 24% in the year to June with operating margin up 340bp, Ralph Lauren grew 14% on average selling prices up 15%, and Tapestry’s own Kate Spade fell 10%. Brand performance, not price positioning, is doing the work. In the UK specifically there is a further drag – VisitBritain’s August forecast puts inbound visits back to 103% of their 2019 level but real spending at only 90%, which bears directly on prime London and airport retail. Resale has moved from niche to structural, with Vinted’s gross merchandise value reaching €10.8bn (£9.3bn) in 2025, up 47%. That matters beyond the share of spend it takes, because a garment with a resale value has a lower effective price, which raises the bar for what a full-price retailer must offer. Live and social commerce takes a further slice – TikTok Shop turned over $64.3bn (£47bn) globally in 2025 and $50.3bn (£37bn) in H1 2026 alone.
11
Labour – The Sector’s Cost and its Customer
The consequence reaches the demand side of the same business. Retail and its supply chain account for almost a quarter of UK youth employment on the BRC’s estimate, and youth unemployment stood at 16.2% in Q2 2026, up from 14.3% a year earlier. The number of 16 to 24 year olds not in education, employment or training reached 981,000 in the same quarter, up 30,000 on the year. Graduate postings are down 46% on Adzuna’s count, and it is tempting to attribute this to artificial intelligence, but the employer evidence points elsewhere. Deloitte’s survey of UK chief financial officers put general cost control ahead of AI as the reason for reduced graduate hiring. The more likely explanation is that employers absorbing a sharp increase in the cost of employment have responded by not creating the lowest-paid and least experienced roles, which are the ones retail has traditionally offered in volume.
Retail employee jobs fell to 2.63m in Q1 2026 on a four-quarter average, the lowest since 1997 and the fifth consecutive quarterly low. That is 46,000 fewer than a year earlier and 326,000 fewer than a decade ago, with part-time roles down 223,000 against 103,000 full-time. The flexible, entry-level hours that retail used to create in volume are the ones being removed, and by the same statutory cost increase that has compressed the discounters’ margins. Employee jobs have been below their year-earlier level in every quarter since the start of 2019, through the pandemic, the reopening and the recovery. Rather than a temporary pause in hiring, this represents a lasting reduction in how much labour the sector can afford.
Hiring is the one indicator moving the other way – the KPMG and REC Report on Jobs, a monthly survey of recruitment consultancies, recorded permanent placements rising in August for the first time since September 2022, with the index at 50.5 against 50.0 in July. Temporary billings grew at their second-fastest pace in more than three years and starting salary growth was the strongest since January. The improvement is narrow – vacancies continue to fall and candidate availability rose partly because of redundancies. The labour market has nonetheless stopped deteriorating, which was not true in February. The difficulty is specific to retail – the young workers whose hours it is cutting are a significant source of the discretionary spending on which non-food retail depends. In reducing entry-level hours to absorb higher employment costs, retailers are removing income from part of their own customer base.
UK Retail Employee Jobs (y/y change in %, four-quarter moving average)
5% 4%
Change on a year earlier
3% 2% 1% 0% -1% -2% -3%
Retail Employee Jobs
2026 Q1
2025 Q1
2024 Q1
2023 Q1
2022 Q1
2021 Q1
2020 Q1
2019 Q1
2018 Q1
2017 Q1
2016 Q1
2015 Q1
2014 Q1
2013 Q1
2012 Q1
2011 Q1
2010 Q1
2009 Q1
2008 Q1
2007 Q1
2006 Q1
2005 Q1
2004 Q1
2003 Q1
2002 Q1
2001 Q1
-4%
No change on a year earlier
Sources: ONS, Note: employee jobs in SIC 2007 division 47, retail trade except of motor vehicles, United Kingdom, not seasonally adjusted; each point is the change on the same quarter a year earlier in the four-quarter moving average, and Q1 2026 is provisional.
12
Politics, Policy and Supply Chain The change of Prime Minister in July, with Andy Burnham succeeding to the leadership and John Healey at the Treasury, has altered the political weather without altering the sector’s cost stack. Almost everything weighing on retail is already legislated: • Employer National Insurance at 15%, with a £5,000 threshold, has been in force since April 2025. • Business rates were reset in April 202610. The temporary 40% retail, hospitality and leisure relief was replaced by permanent lower multipliers for qualifying properties, funded by a new 50.8p multiplier on properties with a rateable value above £500,000. The effect of that trade-off falls on larger stores and prime high street units. • The Employment Rights Act 2025 continues to be phased in. First-day statutory sick pay arrived in April 202611; ahead are a six-month qualifying period for unfair dismissal from January 2027 and guaranteed-hours rights for zero and low-hours workers during the same year. For a sector built on flexible scheduling those are a bigger operational change than anything introduced so far. The Budget on 28 October is the primary domestic uncertainty, and the fiscal position heading into it is uncomfortable. Public sector net debt stood at 94.1% of GDP at the end of July, borrowing over the first four months ran about £2bn above the OBR’s March forecast, and long gilt yields are at multi-decade highs. The headroom against the fiscal rules has been eroded. Announced measures cost money and the offsetting revenue is unidentified. Labour-intensive, property-heavy sectors carried a disproportionate share of the last two consolidations, so prudence suggests planning for the cost base to rise rather than fall. On supply chains, the February edition of this report recorded freight rates well below their highs. That is no longer true – the Drewry World Container Index has risen roughly two-thirds since late May12. Carriers have begun cautiously resuming Suez transits, but Hormuz uncertainty persists and the Panama Canal is reducing capacity from September. Retailers importing autumn and winter stock locked in cost at summer rates, and it will show in the gross margin reported in the spring. A further cost risk, so far unquantified, sits in the equal pay litigation running across the sector. On 7 September the Employment Appeal Tribunal handed down judgment in Next Retail and Next Distribution v Thandi, brought on behalf of 3,540 retail sales consultants, part of a wider claim covering more than 6,000 current and former store workers. Next succeeded on the central question, with the tribunal accepting that market forces can justify paying warehouse staff more than shop-floor staff. Findings for the claimants on several secondary terms survived, and both sides intend to appeal. Comparable claims are outstanding against Asda, Tesco and Morrisons. The judgment narrows the potential liability without removing it; these remain large contingent exposures for some of the sector’s biggest counterparties.
https://www.gov.uk/government/publications/effects-of-the-business-rates-retailhospitality-and-leisure-multipliers-and-high-value-multiplier
10
11
https://www.acas.org.uk/employment-rights-act-2025
https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/worldcontainer-index-assessed-by-drewry 12
13
Credit Risk – Fewer Failures, Bigger Ones
Retail’s own numbers need reading with more care. Insolvencies in retail trade excluding motor vehicles totalled 1,763 over the 12 months to July, down 7.3% y/y but still around 35% above the 2019 level. The sector table appears to show administrations up 22.8%, but that rise is one corporate group counted many times over; on the underlying cases retail administrations fell and sit below their 2019 level. The shift from liquidation towards administration is real at national level and is not yet visible within retail itself. The sub-sector detail sharpens the point, household equipment – furniture, electricals and hardware – is the only part of retail where failures rose over the year, and those are precisely the categories whose implied prices have sat at or below zero.
Over the 12 months to July 2026, 23,040 companies failed in England and Wales, 3.4% fewer than in the preceding year13. On the face of it, corporate distress is easing for a second year. The composition of those failures points the other way, and it has direct consequences for limit-setting. Creditors’ voluntary liquidations (CVLs), which dominate the count and are overwhelmingly micro-businesses, fell 5.5%. Administrations rose 19.3% to 1,810, back to their immediate prepandemic peak, and CVAs rose 13.1%. An administration is the courtsupervised procedure used when a business has assets, employees and contracts worth preserving, so it is what larger companies enter; a CVL is what a micro-business enters. Small companies are failing less often and larger ones more often. Because exposure scales with counterparty size, the risk sitting on an underwriter’s book has risen even though the national count has fallen.
Monthly insolvencies [LHS]
Jun 2026
Jan 2026
Aug 2025
Mar 2025
Oct 2024
May 2024
Dec 2023
Jul 2023
Feb 2023
Sep 2022
Apr 2022
Nov 2021
Jun 2021
Jan 2021
Rolling twelve
Sources: The Insolvency Service, Note: retail trade except of motor vehicles, not seasonally adjusted; bulk insolvencies, administration-to-CVL conversions and moratoriums are excluded.
13
https://www.gov.uk/government/statistics/company-insolvencies-july-2026
14
Rolling twelve-month total
0 Aug 2020
0 Mar 2020
500
Oct 2019
50
May 2019
1000
Dec 2018
100
Jul 2018
1500
Feb 2018
150
Sep 2017
2000
Apr 2017
200
Nov 2016
2500
Jun 2016
250
Jan 2016
Insolvencies registered in the month
Retail Company Insolvencies, England and Wales (monthly count and rolling twelve-month total)
What a Rescue is Now Worth to a Supplier What happens after an administration compounds the point. The dominant outcome in 2026 has been the sale of brand and associated rights to a buyer, while the shops themselves are closed. Gordon Brothers bought Radley’s brand and IP alone in May, the stores since closed; Russell & Bromley sold brand, IP and three prime sites to Next in January while 33 of 41 stores closed. In each case value moved to a purchaser and the liabilities remained behind. These are pre-pack sales, agreed before the administration is announced and completed immediately after it.
Rescue is also proving unreliable. Claire’s UK entered administration in August 2025 and was sold, and the acquiring vehicle failed in the same way in January 2026. The Original Factory Shop completed a company voluntary arrangement in May 2025 and entered administration eight months later. Quiz Clothing’s February administration was its third. A completed restructuring is therefore not in itself evidence that the underlying economics have changed.
Recoveries in that structure are poor, and the most recent case is the clearest illustration in years. Six Harvey Nichols group companies entered administration on 13 August 2026 and the business was sold to Frasers Group, preserving six stores and more than a thousand jobs. Administrators’ filings put the consideration at £43.3m against £270.5m owed to unsecured creditors, with recovery expected at no more than 15 pence in the pound. The group had turned over £184.8m in the year to March 2025, down 10%, with a loss of around £48.7m and net liabilities, and had not been profitable since 2019.
UK Retail Sector: Company Insolvencies (England and Wales)
Sub-sector (SIC)
Latest 12 months (Aug 2025 – Jul 2026)
Prior 12 months (Aug 2024 – Jul 2025)
Change (absolute)
Latest 3 months (May – Jul 2026)
FOOD AND EVERYDAY ESSENTIALS (defensive demand, thin margins) Non-specialised stores - supermarkets & convenience (SIC 47.1)
279
321
-42
66
Specialised food, beverage & tobacco stores (SIC 47.2)
191
204
-13
42
Automotive fuel (SIC 47.3)
6
3
3
1
Food and everyday essentials (subtotal)
476
528
-52
109
DISCRETIONARY NON-FOOD STORES (where most trade credit exposure sits) Information & communication equipment (SIC 47.4)
26
42
-16
9
Other household equipment - furniture, electricals (SIC 47.5)
239
222
17
45
Cultural & recreation goods (SIC 47.6)
78
87
-9
11
Other specialised stores - clothing, footwear, pharmacy (SIC 47.7)
478
479
-1
103
Discretionary non-food stores (subtotal)
821
830
-9
168
Stalls & markets (SIC 47.8)
18
30
-12
4
Non-store - online & mail order (SIC 47.9)
448
513
-65
109
Non-store retail (subtotal)
466
543
-77
113
RETAIL TRADE TOTAL (SIC 47)
1,763
1,901
-138
390
UK TOTAL (all insolvencies, England & Wales)
23,040
23,846
-806
5,811
NON-STORE RETAIL (online, mail order, stalls and markets)
Sources: The Insolvency Service, Note: three-digit sub-sector detail is not published; bulk insolvencies, administration-to-CVL conversions and moratoriums are excluded. Thirty-four of the 113 administrations recorded in SIC 47 are companies in a single numbered series coded to dispensing chemists. 15
The Forward Signals BTG Consulting, formerly Begbies Traynor Group, recorded critical financial distress up 9% across the economy in Q2 202614, with food and drug retailers up 18.4% and 3,988 general retailers in critical distress. Retail distress worsening while retail insolvencies fall points to a growing population of businesses under severe strain but still trading. Bank credit is part of why. The Bank’s Credit Conditions Survey showed availability tightening for small and medium firms in Q2 while loosening for larger ones, and its Agents reported in July that lenders are “prepared to lend but remain selective with a preference for larger, existing clients” and that tightening payment terms were straining some firms’ working capital facilities15. Official data agrees – large businesses in wholesale and retail took 37 days on average to pay suppliers in 2025 and paid 15% of invoices late. The consequence is that risk transfers rather than disappears. When bank credit is withdrawn from smaller retailers the financing requirement remains, moving onto supplier terms and so from the bank’s balance sheet to the trade creditor’s.
14 https://www.btguk.com/news/red-flag-alert-q2-2026-figuresreleased 15 https://www.gov.uk/government/statistics/large-businessespayment-practices-and-performance-statistics-2025
16
Outlook UK retail enters Q4 2026 with recovering volumes and improving sentiment set against compressed margins and external cost pressures that have shifted direction twice this year. The central path assumes neither resolution nor unlimited deterioration in the Middle East – alternating escalation and partial de-escalation, Brent around $100, Hormuz disrupted but not halted, and freight and energy costs resetting higher with each swing.
Base Case – Volume Holds, Margin Does Not Sales volumes grow modestly through the Golden Quarter on improved confidence and a lower saving ratio, but growth stays promotion-dependent and concentrated in food, computing and value formats, with non-food store sales flat to negative. Bank Rate remains at or above its current level through the rest of 2026, with a first reduction unlikely before spring 2027 and a further increase still possible given the split at the July meeting. Inflation drifts up towards the mid-3s over the winter before easing. Margins come under pressure again in the spring, when stock bought at this summer’s elevated freight rates works through into reported gross margins. Retail insolvencies stay broadly flat in count but continue to rise in average size, and trade credit losses rise modestly, concentrated in mid-sized non-food retailers with leveraged balance sheets, town centre estates and nothing that clearly distinguishes them from competitors. The base case does not describe a stable position. It describes a sector absorbing repeated moderate cost increases without the pricing power to recover them, which most operators can withstand for a year and few for much longer.
Scenario A (Downside) – The External Squeeze Intensifies In this scenario the pattern of alternation ends, with conditions settling at the more severe end of the range. Hormuz restrictions harden, Brent holds in a $115 to $125 range, container rates climb through the winter contracting season, and fuel and energy pass-through pushes CPI above 3.5% and into core. The Committee’s hawkish minority becomes a majority and Bank Rate rises to 4.0% or above, while the October Budget adds further employment or property cost to close a fiscal gap. Consumer confidence, currently the main support for demand, reverses quickly. A weak Golden Quarter follows. Because retailers would enter it holding stock bought at elevated import and freight costs, the likely response is deeper discounting against an already thinner margin. Administrations accelerate in Q1 2027, the usual point of failure after a disappointing Christmas, and pre-pack sales leave unsecured creditors with little or no recovery, as before. This is the scenario in which trade credit losses rise materially rather than modestly. The indicator to watch is whether the November or December CPI print shows energy pass-through reaching core; if it does, the rate rise moves from tail risk to base case.
Scenario B (Upside) – De-escalation and a Benign Budget The de-escalation of June recurs and holds. Hormuz reopens, Brent falls back towards $75 to $80, container rates normalise, energy caps fall in the January and April reviews, and the Committee resumes cutting to 3.25% or 3.50% by the end of 2027 while the Budget leaves the retail cost base unchanged. Improving real incomes meet an already-recovering consumer, and the volume growth so far bought with discount begins to be earned. Margin rebuilds slowly, because freight and energy unwind faster than wages and rates. Even here the structural pressures persist – the labour cost stack, the shift from high street to retail park and to online, and the open door on low-value imports until 2028. The outcome would be a better cyclical position rather than a structural repair.
17
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UK Retail Report 101897 *09/2026