Acting early can prove crucial for retail industry

The retail industry continues to report store closures and administrations, but acting early on warning signs could make all the difference to the future of the company advises Moore Blatch solicitors.

June was a particularly sobering month for retail with popular household names like Carpetright, Jane Norman, Habitat, Thorntons, Moben Kitchens and Dolphin Bathrooms all announcing operating difficulties.

Moore Blatch insolvency specialist, Lisa Saxby comments: “A recent survey suggests that some 67,000 retail companies across Britain are in “imminent danger of collapse”.

“Whilst this figure provides a stark reality – it is clear that many companies are finding trading very difficult at this time.

“Acting early can really make a big difference. Even if the option is to enter into informal insolvency procedures, planning ahead can result in more jobs being retained and smaller losses to creditors – which can only be good news for everyone,” advises Lisa.

A key reason for the current wave of administrations is believed to be down to the quarter rent payment which was due on 24 June for many retail businesses. This requires retailers to pay 12 weeks of rent up front and may have been a crucial factor for many businesses announcing administrations and store closures – especially where businesses are operating a large number of stores.

Lisa continues: “Any business facing rent pressure should consider negotiations with the landlord, as they may be facing similar constraints. Also with the recent rule changes for empty properties, Landlords will be more incentivised to hold onto tenants.”

An alternative choice for many businesses may be to enter into administration, with the main aim being to rescue the company using a “pre-pack”. This will allow the company’s assets and business to be sold out of the administration, leaving behind its debts.

“Although often viewed negatively, the reality is that pre-packs can allow many companies to save some of its business, retain some stores and more importantly rescue jobs.

“Also, obtaining advice can often protect directors from becoming personally liable,” concludes Lisa.