The UK’s retail sector continues to display resilience amid economic pressures, with Atradius, one of the UK’s leading trade credit insurers, revealing notable trends in late payments and insolvencies as the year concludes.
The trade credit insurer highlights a rise in payment defaults in specific retail categories but remains optimistic about the sector’s ability to adapt and thrive in 2025.
Atradius data shows an increase in claims for late or failed payments across retail supply chains during Q3 2024. Domestic appliance firms saw payment defaults rise by 450%, manufactured leisure articles by 60%, and consumer durables by 28% year-on-year, reflecting ongoing challenges in the sector.
However, despite these headwinds, the retail sector has demonstrated steady growth. Sales volumes increased by 1% in August 2024 and by 0.3% in September 2024. This positive momentum is set against the backdrop of a highly anticipated Black Friday, which last year generated £1.4 billion in online sales. Retailers are gearing up to capitalise on the festive season, which could provide a crucial revenue boost ahead of Q1 2025.
The Autumn Budget 2024 introduced measures that could both bolster and challenge the retail sector. The extension of business rates relief for another year and increases in the National Living Wage aim to stimulate consumer spending. However, these changes come alongside rising supply chain costs, higher Capital Gains Tax, and increased employer National Insurance contributions, which could significantly impact SME profit margins.
As nearly 7,000 shops have closed across the UK this year – equating to 38 closures per day – retailers must remain vigilant. High-profile insolvencies, including Ted Baker, The Body Shop, and Homebase, underscore the importance of financial safeguarding in an unpredictable market.
Retailers are increasingly turning to innovative strategies, such as hybrid shopping and AI-driven customer experiences, to meet evolving consumer expectations. With 74% of UK consumers citing customer service as a key factor in brand loyalty – and 48% willing to pay more for quality service – retailers have a critical opportunity to differentiate through exceptional customer experiences.
Ruby Hartery, Senior Underwriter at Atradius UK, said, “As we approach 2025, it’s crucial for retailers to remain adaptable in navigating the shifting economic and retail landscape. Enhancing customer service, ensuring transparency, and leveraging seasonal opportunities like Black Friday will be vital. While challenges remain, increased consumer confidence and strategic financial planning will help retailers thrive in the new year.”
Hartery also emphasised the importance of financial safeguards, he added, “In times of economic uncertainty, protecting supply chains and trade agreements through trade credit insurance is fundamental. This allows businesses to mitigate the risk of payment defaults and maintain stability even in volatile market conditions.”
The combination of government initiatives, evolving consumer expectations, and innovative retail strategies offers both challenges and opportunities for the sector. Retailers who prioritise financial resilience, embrace technological advancements, and enhance customer experiences will be well-positioned for success in the new year.
