Bloodbath coming on the High Street - R3

Crank the Gloom-o-Meter up to 10.

In the first few months of 2009, around 22 well known high street retailers went into insolvency.  23 household names face the same fate in the first few months of 2010, a recent survey of R3’s insolvency experts predicts. 

• Reflecting on why the New Year period is so devastating for retailers, 90% of R3 members say retailers deliberately delay starting insolvency proceedings until the New Year, hoping they will recoup the money over the festive period;
• More than half of insolvency experts (61%) believe creditors also hang back, hoping they’ll receive higher returns due to increased takings over Christmas;
• Compounding these factors, 76% of insolvency experts believe rising unemployment will result in less consumer spending. 86% predict this decrease in spending will in turn push many retailers into insolvency in early 2010.

Signs of economic recovery are also unlikely to help retailers - 85% of insolvency experts believe this will prompt creditors to start acting more aggressively, as assets rise in value.  With the VAT increase in January, the first quarter of 2010 looks bleak.

Commenting, Peter Sargent, President of R3, says:

“Rising unemployment and decreased spending in the lead up to Christmas coupled with heightened creditor aggression in the New Year leaves the retail sector facing another bloodbath.

“While it would be comforting to think that the worst of the downturn is over, it’s worth remembering that insolvency peaks after a recession ends.

“We urge retailers to seek advice early when there is a better chance of rescue, rather than desperately clinging on, hoping that Christmas will cure all ills. The recent case of creditors agreeing a CVA in the case of Blacks Leisure shows there are insolvency and rescue procedures available to stave off liquidation. These procedures could help many businesses currently in the ‘at risk’ zone”.