Retail insolvencies in first quarter jump 15 per cent

Failures of big names on the high street this year throw 10,000 people out of work

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The Independent Online

The number of retailers that collapsed into administration jumped by 15 per cent in the first quarter of this year, as the growth of online sales and the consumer downturn continued to hit weaker chains with too many stores.

The bigger scale of the most recent high-profile retail failures also resulted in much deeper job losses on the high street than in the opening three months of 2011.

The accountancy firm Deloitte said that 69 chains called in administrators in the first quarter, compared with 60 a year ago.

The most recent collapse was Game Group, which had 610 UK stores and fell into administration on 26 March, the day after failing to pay its second-quarter rent.

Lee Manning, the restructuring services partner at Deloitte, said: "While the quarterly rent day often sets the timing for the insolvency, a significant trigger in a number of recent administrations is that many retailers have too many marginal stores. As online retailing continues to grow while overall spending is weak, the fixed costs and poor performance of some stores drags on the overall business."

The 69 retail administrations in the first quarter represented a 64 per cent leap on the final three months of 2011, when 42 collapsed. In addition to Game, the other high-profile failures in the first quarter included the lingerie firm La Senza, the fashion retailer Peacocks, the outdoor specialist Blacks Leisure, and the gift seller Past Times. Apart from Past Times, these retailers were acquired out of administration, typically with less stores. Deloitte said that these five chains accounted for nearly 10,000 job losses from a total of 22,000 employed.

In contrast, the first quarter of 2011 saw far fewer job losses, as the largest 15 retail insolvencies in this period had just 2,800 stores. From these 15 chains, only 1,350 shops survived – an attrition rate of 52 per cent.

Mr Manning said: "In order to remain competitive, some retailers will need to rethink their business models to be nimble and adaptable to changing consumer trends. A fast-changing retail environment will require certain businesses to reassess their store portfolios, not as a matter of choice, but in order to survive."

Meanwhile, a leading banking body has warned that retailers could miss out on millions of pounds during the Olympics due to poorly trained staff rejecting the credit and debit cards of overseas visitors. The UK Payments Administration said that it was worried that visitors from countries, such as the US, without chip and pin card technology could have their purchases declined by poorly trained shop staff.

"There are many countries around the world that don't have chip and pin card technology yet and these customers could be turned away, particularly during the busier than usual period for retailers around the Olympics," said Sandra Quinn, head of communications for UK Payments. But Ms Quinn added that till staff should be told that they can still accept a card and signature if the customer's card doesn't have chip and pin. In response, though, retailers said accepting signatures put them at risk: "In cases of fraud, the banks won't cover us if we have accepted a signature and that's probably why some till staff and managers are reluctant," said Richard Dodd from the British Retail Consortium.