Credit crunch bites into UK fashion firms

By Elena Moya

LONDON (Reuters) - The number of UK clothing, fashion and cosmetic retailers going into administration rose 21 percent in the first half of 2008 as the global credit crunch crimped consumer spending, a Deloitte DLTE.UL report said.

The number of clothing businesses that filed for administration in Britain in the first six months of the year rose to 40, up from 33 during the same period last year, the accountancy firm's report said on Wednesday.

"Fashion is often one of the first sectors to be hit hard as consumers' discretionary spend is tightened and those retailers whose customer offering isn't spot on experience sales slippage," Deloitte said.

Mid-market clothing retailers, such as Ethel Austin, have filed for administration, caught by lower consumer spending and soaring fuel prices. Struggling retailers also face higher financing costs and banks' increasing aversion to risk, which makes a debt restructuring less likely.

Credit crunch effects are spreading into the economy, after initially affecting global financial institutions. Furniture and household related retailers are expected to suffer in the months to come, Deloitte said.

"The retailers that are able to both react quickly to the market by adapting their offerings to changing customer needs while encumbering as little cost as possible will be able to both survive and achieve business success," said Richard Hyman, strategic adviser to Deloitte.

Britain's sales volumes in July fell by 36 percent, while the outlook for August trading remains bleak, the Confederation of British Industry said in another report, out on Tuesday.

Demand for big-ticket items was especially weak, with durable household goods and furniture and carpets retailers reporting that sales were down on a year ago, the CBI said.