Administrations come amid bleak winter for retailers

2018 has been dubbed the 'year of retail distress' by one industry observer
2018 has been dubbed the 'year of retail distress' by one industry observer

The collapse into administration of two major UK chains on the same day comes in the midst of a bleak winter for retailers.

Electronics company Maplin and Toys R Us are the first high-profile casualties this year, but high street chains across the board have been struggling to adapt to falling consumer spending, rising inflation and the success of online rivals.

The start of the year saw the first January drop in consumer spending since 2013 and a sharp 4% fall in spending on the high street, according to Visa, as people continued to cut back on spending.

And latest Office for National Statistics figures showed retailers barely scraped a rise in sales at the start of the year, with the agency’s senior statistician Rhian Murphy describing the long-term retail diagnosis as one of a “continued slowdown”.

Also on Wednesday, restaurant chain Prezzo said it was restructuring its business in a move that will see up to 100 of its 300 sites close.

A string of high-profile retailers warned over profits at the start of the year after failing to churn out bumper sales during the crucial Christmas trading period.

Sluggish sales and the weak pound forced troubled fashion and homeware retailer Laura Ashley to issue a profit warning, adding to a clutch of dismal updates from the likes of Carpetright, Mothercare, Debenhams, House of Fraser, Moss Bros and Card Factory.

This year has also seen burger chain Byron and Jamie’s Italian undertake Company Voluntary Arrangements (CVAs) as they come under increasing pressure from rising costs and falling consumer confidence.

Soaring business rates, National Living Wage costs and the Apprenticeship Levy have also taken their toll.

Richard Hyman, who has analysed the retail sector for more than 30 years and predicted last year that 2018 would be “the year of retail distress”, said the latest developments came as “no surprise”.

He said: “As the pressure mounts, the weakest will fall.

“Brexit is an exacerbating factor but the principal cause is structural. We’ve got too many shops, the shops are too big, and there are too many websites.

“There are too many mouths to feed and the consumer economy is in a very weak condition and has been for a very long time, and there is no evidence of that changing.”

Economists are expecting some relief for shoppers as inflation eases and wage growth picks up pace, but political uncertainty is likely to mean that the retail sector remains under intense pressure.