New report suggests half of UK retailers will face administration this summer

17 April 2020

New report suggests half of UK retailers will face administration this summer

A new report by Alvarez & Marsal, joint with Retail Economics, suggests that half of Britain’s high street chains could enter administration by summer following difficulties in managing cash flow, brought on by the coronavirus crisis.

A study of 34 British retailers, including Card Factory, Next, Shoe Zone and Mulberry, found that five of the non-food UK retailers had negative cash flows prior the pandemic. They relied on credit for any investment funds.

Interestingly, the study suggests that even if sales dropped by 10 per cent in this lockdown period, a negative cashflow would be experienced by more than two thirds of retailers. So, with sales expected to fall as much as 70 per cent, retailers really are playing with fire.

Already we have seen some high street names sink; BrightHouse, Laura Ashley, Debenhams, Oasis and Warehouse. Despite this, retailers are being offered 12-month long business rate holidays, the choice to furlough workers if they fit the CBILS eligibility criteria, and some protection over being evicted from premises.

But of course, with an extension to the lockdown and no certainty about the future for businesses or the lockdown being lifted, the demands from retailers, which have so far been met from the government and so saving brands from collapse, will intensify. Alternative ways to survive will be needed.

MD of Alvarez & Marsal, Richard Fleming, explained that the coming few weeks are crucial.

‘’Retailers need to ask themselves the tough questions and take steps to address underlying operational issues why they still have the chance.’’

A shift in consumer purchasing behaviours has been noted; moving more towards online shopping as all non-essential stores were closed. This behaviour is thought to continue as consumers form new habits.

In other updates; the treasury has warned unemployment could soar to 3.4 million, being the worst financial crash on record. We also have warnings of it being the worst slump of GDP in a single quarter since the start of records in 1908, with the global economy suffering its deepest plunge since the 1930’s Great Depression.

Categories: Retail

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