HIGH STREET CLOSURES AFFECT US ALL, WARNS INSOLVENCY EXPERT
The face of the High Street is changing, following the collapse of famous names like Toys R Us and Maplins and the threats to chains such as New Look, which has entered into a company voluntary agreement in the wake of huge losses.
Research by analysts Company Watch has revealed [March 2018] that 44% of High Street retailers are showing signs of financial distress, a worse rating than during the height of the global financial crisis in 2008.
Company Watch looked at the accounts of 54,000 retails companies and identified those in a red zone and at risk. Around two-thirds (61%) of these are small retailers. It also identified some familiar names which are currently failing to make a profit including Hobbs Fashion, Mamas & Papas, Paperchase, Crew Clothing and Crocs UK Ltd.
The figures come as no surprise to insolvency expert Roger Miller, solicitor and senior partner of Plymouth-based Curtis Whiteford Crocker. He has also seen the difficulties of bigger High Street names and businesses having a knock-on effect on smaller companies.
“The way the world exists is changing considerably,” says solicitor Roger. “The continued decline of the High Street and a lot of insolvency has had a knock-on effect. Online purchases and cheap suppliers are having a huge impact on businesses.
“It’s particularly difficult for the smaller business. They might have five employees or less and live hand to mouth. They can’t afford to have a black hole in their balance sheet.
“Bigger businesses might break down into different parts so you can hive off the good bits, which keeps people in employment because they can transfer to the new concern. Then they can lose the bits that are not profitable.
“Toys R Us has collapsed because they couldn’t find a buyer; their online business was just not strong enough.”
The collapse of Carillion, Britain’s second-largest construction company, in January exposed the way businesses treat the smaller contractor.
“Big businesses have been treating sub-contractors this way for years,” says Roger. “They will delay payments or ask for discounts. And when the businesses collapses, priority will go to creditors like the banks.
“It does all have a knock-on effect. If businesses are run online, they’re not paying business rates for High Street premises and the local authority has less money for the services everyone demands. That means councils don’t have enough money for things like seeing potholes are filled. And many properties are owned by pension funds. So empty units mean less money in pension pots.
“Everything comes back to the consumer and we all suffer. There’s a real impact on jobs – supermarkets have self-service tills, banks are closing and being replaced by cash machines.”
There are a number of different reasons why businesses are struggling and insolvency is “the real tip of the iceberg,” says Roger.
“I do see a bit of a Domesday scenario,” he admits. “Artificial intelligence, driverless cars. The working population will shrink which means they will have to pay more tax for the people who can’t work. We can see what’s happened with pensions, they are just pushing the retirement date further away.”
There are ways in which businesses can protect themselves in some cases, reassures Roger. “If you supply goods, you could have a retention of title clause in your contracts which means the goods remain your assets. It may be worth including that in your terms of business. Another way of protecting is good credit control and acting swiftly against business who owe you money.”