Hungarian retailers closing at rates not seen since Great Recession

November 30, 2016

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Nearly 28,000 retailers have gone out of business in Hungary since 2006 as smaller shops continue to lose market to larger ones. 2,700 retailers closed their doors in the first half of 2016 in Hungary, a rate not seen since the years following the 2008 financial crisis, reports napi.hu

Data published by the Central Statistical Office (KSH) shows that the total number of retailers in Hungary fell from 141,133 at the beginning of this year to 138,794 by the end of June, a difference of 2,339. The number was partially offset by a minor increase in the number of large retailers, while small retailers saw a net decrease of 2,700.

The number of retailing operations in Hungary has steadily declined since peaking at 167,000 in 2006. A dramatic drop in economic activity following the 2008 world finance crisis caused the number of retailers to decrease by 15,000 to 152,000 by the end of 2010. The subsequent closure of an additional 13,000 businesses since 2010 suggests that reasons other than the financial crisis were responsible.

Larger department store chains are steadily gaining market share at the expense of small shops. This year’s wave of small business closures could be a result of average wage increases of 6-7 percent caused by Hungary’s labor shortage, which raises questions of how substantial minimum wage increases planned for the next two years will affect small businesses.

Hungary’s smallest retailers have been hit hardest by closures, with the number of retailers operating only a single shop (the most common type), decreasing by 12,122 since 2006. Retailers owning between 2 and 20 stores lost a total of 15,613 stores in the same period. By contrast, retailers operating more than 21 stores closed only 209 of them during this period.