Eleven more high street retailers will collapse by May as the recession rips
through the UK high street.
This is the gloomy prediction from members of R3, the UK trade association
for insolvency, business recovery and turnaround specialists.
Over the past six months a growing list of household names, including
Woolworths, Whittards, the tea and coffee specialist, and Waterford Wedgwood,
the china and crystal maker, have gone bust.
‘Our survey shows that UK insolvency practitioners believe that we have not
yet seen the worst,’ says R3 president Nick O’Reilly.
He adds: ‘An overwhelming majority of insolvency practitioners believe that
this downturn will be deeper than the 1990s recession; over two thirds think
this one will last longer, and three quarters think more businesses will close
this time around.’
R3 members predict that corporate insolvencies will peak at 19,796 in 2009.
This is a 26% increase on predictions insolvency practitioners made for 2008.
The retail sector is particularly vulnerable as consumers cut discretionary
spending in a recession.
Insolvency Service figures released last week showed a 220% surge in number
of administrations, receiverships and company voluntary arrangements for the
final quarter of 2008 compared to the previous year.
Retail experts say finance directors have little option other than
discounting stock even though this will hit profit margins and is likely to
increase company pension deficits.
Pension shortfalls are a worry for staff if a company goes under; they can
also scare off possible buyers when a company goes into administration.
Few experts predict an imminent recovery on the high street.
Even a leap in sales in the first week of January appears to be a false dawn,
according to an analysis of retail sales by KPMG. Partner at KPMG, Helen
Dickinson, puts the recovery in sales down to heavy discounting and clearance
sales to clear excess inventories.
Earlier this month, Landsbanki – the part-nationalised Icelandic bank, which
is owed £1bn by Icelandic retail investor Bauger – filed a petition in the UK
courts to have Baugur’s stake in companies including Iceland, Hamleys and the
House of Fraser ring-fenced by placing BG Holdings into administration.
In response, Baugur applied for a moratorium, which stops creditors from
blocking asset sales.
PricewaterhouseCoopers has been put in charge protecting Landsbanki’s
investment in Baugur. The Big Four firm now holds Baugur’s 13.7% stake in frozen
food retailer Iceland, 34.9 % of House of Fraser, 63.7% of Hamleys and 37.8% of
Aurum Group, which runs retailers including Mappin & Webb and Watches of
Steve Absolom and Will Wright from KPMG Restructuring have been appointed joint administrators to City Motor Holdings and associated companies
Partners from Johnston Carmichael have been appointed as joint administrators to Axon Well Interventions Products UK
Begbies Traynor have been appointed administrators of William Anelay Ltd, York, one of Britain’s longest-established construction and heritage restoration companies
Smith & Williamson has been appointed administrators of charity 4Children