Creditors pay £1bn for retail failures

 

Creditors, such as suppliers and landlords, are likely to have lost more than £1bn from the retail sector's 20 biggest insolvencies since the start of last year, according to the credit information specialist Company Watch.

The data lays bare the damage done to the UK economy from the big high street collapses, although this represents just the tip of the iceberg, as significantly more smaller retailers disappeared over the same period.

Total unsecured debt came in at £1.03bn from just 20 retail administrations, including the sportswear chain JJB Sports, the fashion chain Peacocks and the electricals specialist Comet, since January 2012, leaving creditors, including employees, out of pocket.

The figures include £134m in unpaid VAT and pay-as-you-earn taxes to the Government, and come at a time when more than one in seven shops on average is empty in UK town centres. The Local Data Company estimates that nearly 25,900 shops have closed since the turn of last year, including 17,500 independents.

Nick Hood, the business risk analyst at Company Watch, said: "The retail sector has been one of the worst hit since recession first hit the UK in 2008 and the pain goes on and on, made worse by structural changes caused by the relentless growth of online and mobile, or smartphone, app shopping."

Comet, which disappeared just before Christmas, alone accounted for £26.2m of the unpaid taxes to HM Revenue & Customs.

Overall, it is likely that creditors will have recovered only a small portion of the £1bn-plus of unsecured debts at the end of the insolvency processes.

For instance, while a slimmed-down version of Peacocks was rescued out of administration by Edinburgh Woollen Mill last year, administrators estimated that creditors received a dividend of less than 1p in the pound on its unsecured debts of £321m.

In addition to the £1bn losses, local councils will have suffered bad debts for many millions in unpaid business rates. The Government is also having to pay benefits to an estimated 60 per cent of the 58,855 who lost their jobs in the 20 big retail insolvencies, according to Company Watch.

The retail expert Paul Turner-Mitchell said: "The Government is suffering from a policy paralysis and seems to be unable to grasp the nettle of serious structural change that's needed to support our high streets. But while they continue to dither and fiddle in the margins, billions are being lost and jobs are disappearing."

The accountancy firm Deloitte said 194 retailers had called in administrators last year, a 6 per cent jump on the 2011 total.

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