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Retailers increasingly turning to CVAs to restructure their businesses

18 April 2018

Retailers increasingly turning to CVAs to restructure their businessesRetailers increasingly turning to CVAs to restructure their businesses

UK high street flagging as retailers increasingly turn to CVAs

New figures from the British Retail Consortium (BRC) show UK high street and wider retail performance declining sharply in 2016/2017.

This has been borne out in the high number of companies entering administration or seeking creditors voluntary arrangements (CVAs) within the last 12 months.

Here, we'll take a closer look at UK high street performance and the factors causing it to suffer.

What has happened to high street performance in the UK?

These are the key statistics from the latest BRC research:

  • Overall year-on-year (YOY) retail footfall fell 6% in March 2018
  • No UK regions saw growth in terms of footfall during this period
  • Footfall was down 1.4% on average over the 12 months to March 2018
  • Greater London (7.5%) and the South East (6.5%) saw the most rapid fall in footfall
  • The high street experienced the most drastic decline (8.6%) of all retail destinations
  • Shopping centres (4.8%) and retail parks (1.8%) also saw a decrease in performance

How has this affected specific businesses?

Several UK high street retailers have hit the headlines after being forced to take action due to falling footfall, including:

  • Carpetright: Closed 81 further stores and requested further investment via a CVA
  • Next: Recorded 8.1% fall in profits, making it the most challenging year in its 25-year history
  • Toys R Us: Entered administration after failing to find a buyer having implemented a CVA
  • New Look: Closed 60 stores and cut 980 jobs after agreeing a CVA

What's caused this decline in high street performance?

eCommerce, falling consumer confidence, rising inflation and an increased National Living Wage have all contributed to the long-term decline of the UK high street.

However, the most pressing factors impacting the retail sector in March 2018 were:

1. Bad weather

“The prolonged period of bad weather has had an impact on shoppers visiting the high street", according to BRC Chief Executive, Helen Dickinson OBE (BRC).

March 2018 was, in fact, the wettest in a decade with rain and cool temperatures apparently keeping high street shoppers locked up at home.

2. Business rates

Increased business rates are potentially the biggest single contributing factor when it comes to UK high street performance. As of 1 April last year, business rates have risen significantly for 500,000 companies.

Gary Grant ¬¬–  founder of high street toy retailer The Entertainer commented: "Landlords are being very realistic about their rent, but the one thing that is not negotiable are business rates.

"[The retail sector] is seeing many stores empty for long periods of time and the biggest issue is that [retailers] can’t open stores.

“Business rates are out of line now with retail turnover. Business rates are the real killer. Any increase in cost where you have flat and declining turnover is going to put pressure on the bottom line.

“The Government just haven’t got it. They need to take some responsibility for the high street’s decline.”

With the UK high street continuing to suffer, it pays to know your options as a company boss. Taking difficult yet decisive decisions at the right times will put you in the best possible position to keep your company trading successfully.

If you are worried about declining UK high street performance and the prospect of a CVA, contact the experts at Company Rescue today.

Categories: Retail, CVA, What is a CVA or Company voluntary arrangement?

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