Dozens of retailers on the brink as rents fall due
Insolvency specialists warn of more trouble for high streets shunned by many shoppers
Monday 24 December 2012
The scale of the crisis on Britain's high streets will be laid bare on Monday when new figures show that 140 retailers have "critical" financial problems.
On the day many retailers will pay their final rent instalment of 2012, the insolvency specialist Begbies Traynor will warn that next year is likely to see more companies running into financial difficulties.
The news is another blow to a sector that has endured a torrid 12 months. Well-known retailers such as JJB Sports and Comet have disappeared from the high street this year while other such as Clinton Cards and Blacks Leisure have gone into administration.
Julie Palmer, a partner at Begbies Traynor, said: "Though the performance of national retailers is well-documented, it represents just the tip of the iceberg, with thousands of smaller and specialist retailers struggling to stay afloat in austerity Britain.
"Consumers have been saving their shoe leather this festive period by shopping at supermarkets and large department stores, focusing on the perceived value of getting all things in one place while avoiding the cost and hassle associated with town centre parking."
Begbies Traynor said the companies most likely to suffer next year include those specialising in books and stationery. Pharmaceutical and personal care providers were also at risk, as well as off-licences.
On a brighter note, it said companies selling furniture, lighting equipment, home decorations, hardware and paints were now in a stronger position than in 2011.
The financial health of Britain's retailers will be put the test today when quarterly rent payments are due to landlords. This could be the final nail in the coffin for retailers already struggling to balance the books.
Nick Martyn, property litigation associate at the law firm Mundays, said: "Stumping up three months' rent in advance can put a strain on retailers' cash flow – already stretched by shoppers' tightened purse strings and suppliers' pressure for shorter payment terms. Previous rent days this year forced retailers Aquascutum, Peacocks and Game into administration, with the latter suspending dealing in its shares as a result of experiencing difficulties in raising the £180m needed to pay rent for the March 2012 quarter.
"Retail tenants are increasingly asking their landlords if they can pay rent on a monthly rather than quarterly basis to bolster their cashflow – especially important over the Christmas period," he added.
HMV is among the retailers under pressure, having issued a "going concern" warning earlier this month. The company, which has 238 stores, suffered a £37.3m loss during the six months ending 31 October, and warned that it would almost certainly breach banking covenants in January.
The company will be among those hoping for a boost over the festive period, with UK shoppers set to spend £2.9bn on Boxing Day alone, according to Moneysupermarket.
Almost 4 million people will head to the high street on 26 December – although 1.41 million will log online on Christmas Day to shop from home.
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