Half UK salons need financial help, but market still strong

Almost half of the UK’s largest hair and beauty salon companies are in urgent need of financial restructuring, according to new research.

Some 196 of the 462 largest salon businesses need an injection of capital or radical financial restructuring if they’re to continue to trade.

The figures are the result of a broad study by analyst Plimsoll, which investigated the overall financial performance of each of the UK’s leading salon companies and scored each on their financial health.

However, Plimsoll said the large proportion of companies in need of attention does not indicate an overall market decline. Each company was given a rating of either strong, good, mediocre, caution or danger. While 42% of the top salons were given a danger rating, a further 36% were rated strong.

Plimsoll senior analyst David Pattison said: “The 165 companies rated as strong have a real commercial advantage and they are proof the fundamental market is healthy.”

However, he added: “It is clear from this study that the hairdresser and beauty salons market is going through a period of great change and the market is highly competitive. These 196 companies rated as danger are clearly operating under financial pressure and many risk being forced out of the market.”

The method of analysis was first tested on a study of 351 previously failed companies and this showed 320 had a caution or danger rating up to two years prior to their demise.

Pattinson said: “If failures are predictable, and if enough warning can be given, the management has time to get a survival plan in place to save the company.”

Of the "danger" companies, 135 are making a loss, most are losing an average of 1p on every £1 they sell and many have high debts.

The "strong" companies are generally making 2% margins per year, sitting on healthy cash piles and operating debt free.

This story first appeared in Professional Beauty Magazine. To be among the first to receive exclusive industry news, subscribe to the digital edition of the magazine for just £4.99 for one year, or download your September issue for free.