An expert on businesses in crisis has warned councils and landlords not to treat the retail sector as a cash cow after it suffered its worst ever quarter for insolvencies.
Eileen Blackburn, head of restructuring and debt advisory at French Duncan , spoke out as it emerged 28 retailers were made insolvent in the first quarter. That represents more than 40% of the figure of 68 for the whole of 2018.
Blackburn said landlords must be more realistic about rents and local authorities about business rates if they are not to see shops disappearing altogether.
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She said: “Given that the retail sector has been experiencing steady very high numbers of business failures over a prolonged period this does not bode well for an uplift in the sector despite recently reported improved sales figures. Clearly there are major problems with retail which are not being addressed.
“The news that the headline business rate has risen from 40.7% to 49% in less than 10 years will surprise no one in the sector, who have long been campaigning for reform. For medium-sized and larger commercial premises the increase is greater from 41.4% to 51.6% resulting in an additional £13.2 million in rates for retailers.”
Retailers which closed stores in the first three months of this year have included Oddbins, HMV, Pretty Green and Office Outlet. Debenhams plans to close 22 across the UK this year but plans to keep others open after cutting rents through a CVA, while LK Bennett is trading through administration.
Blackburn added: “Councils must realise that retailers cannot continue to pay these levels of charges. Equally landlords remain deaf to the calls of the retail sector to look at rentals which remain locked in an outmoded business model which is causing much of the financial distress in the sector.
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“Retail is a dynamic sector which is in constant change yet the way our High Street is taxed and levied is a throwback to an earlier era. Change needs to happen soon if we are not to see our High Streets decimated by insolvency and the closure of many familiar and well-loved shops.
“There must be some negotiation on the part of landlords and councils to accept that if they are to continue making money from retailers they must accept and facilitate a situation where retailers can make money.
"Treating the retail sector as a cash cow simply doesn’t work any more and if everyone is to benefit and ensure we have a high street in the future then councils, landlords and retailers must get together and work out a mutually beneficial system. The latest insolvency figures indicate that time may be running out.”
