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£1.86bn lost for retail creditors 1 July 2013

Retail suppliers and creditors are the biggest losers from retail insolvencies, collectively missing out on £1.86bn as a result of high-profile retail insolvencies.

The research, carried out by former Wickes chief executive Bill Grimsey in conjunction with Company Watch, covered 19 high-profile retail failures since the start of 2012.

The 19 chains, including HMV, Jessops, Republic, Comet, and Blockbuster, all entered administration between January 2012 and May 2013, collectively threatening 4,500 stores and putting 58,000 jobs at risk.

Grimsey said: “What this demonstrates is that the structural changes happening to retail are causing huge damage to our high streets and the wider economy. This is the clearest possible proof that we need to start looking at a new model for our high streets. The current model is just not sustainable.”

The research found that within most cases unsecured creditors, such as small businesses, landlords and HM Revenue & Customs, stand to receive no more than a small fraction of a penny in the pound – less than 1% of what was owed.

Only £13.8m will go to ordinary unsecured creditors.

Of the cases studied, banks and other secured lenders received the most significant portion of net recoveries – at least £356m. £123m was spent on administration fees, including future fees.

Nick Hood, business analyst at Company Watch, says the “only winners from the on-going carnage in the high street are the banks, the insolvency practitioners, and their many advisers.”

He explained: “Ordinary creditors are carrying the can for weak management, uncompetitive retail offerings, the pernicious effect of upward only rent obligations and iniquitous business rates.

“The cut in consumer spending caused by the recession and its austerity consequences has played its part. We are far from seeing the end of the high street cull.”

Last week, retailers Modelzone, Ark Retail, Internacionale and Dwell all entered administrative proceedings, putting a further 2,180 jobs at risk.

 

 

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