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UK Retailers Likely to Bear Brunt of Raging Cost-of-Living Crisis

© AP Photo / Kirsty WigglesworthA homeless person sleeps in front of a closed clothing shop in London, Thursday May 14, 2020, as the country continues in lockdown to help stop the spread of coronavirus
A homeless person sleeps in front of a closed clothing shop in London, Thursday May 14, 2020, as the country continues in lockdown to help stop the spread of coronavirus - Sputnik International, 1920, 27.12.2022
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2022 was not a good year for the UK economy, with record-high inflation, a collapsing pound, and rising mortgage rates. The retail sector also experienced problems. According to forecasts, however, the situation could become much worse in 2023.
Experts believe there's a growing uncertainty in the retail sector of the British economy, caused and exacerbated by the cost-of-living crisis.
Erin Brookes, managing director and head of retail for Europe at Alvarez & Marsal, believes the retail market in 2023 could see small firms going bust and being taken over by big players, as the former have "come out of the pandemic with much weaker balance sheets and have now been hit by lower consumer sentiment, alongside any supply disruption and cost inflation."

"That is likely to involve picking up businesses in rescue deals or even just opportunities, from other retailers or investment firms, to buy firms at what they feel is a low price given how much shares have dropped."

However, Ms. Brooks notes that the Christmas season could perhaps save the situation for some retailers: "If you have a good Christmas, then it gives them a solid footing, but if some under pressure retailers report weaker-than-expected trade, then they might be considering their next options."
For his part, James Burgess, head of commercial at Atradius UK, noted "an increase in overdues and insolvencies" in the retail sector, with some companies being affected by the end of government support schemes.

"The sector's so-called 'golden quarter' in which sales generally increase across major retail events like Christmas and Black Friday is more important than ever this year… We'll continue to monitor post-Christmas results but having already seen a couple of large failures in Q4, 2022, we expect the negative trend to continue into 2023."

The raging cost-of-living crisis in the United Kingdom began in 2021, when prices for many basic necessities began to rise faster than household incomes, causing real incomes to plummet. Soaring inflation in Britain, the COVID-19 pandemic, and sanctions imposed on Russia over the start of its special military operation in Ukraine are among the reasons for the crisis.
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