More CVAs following Arcadia on the way as retail sector problems continue

French Duncan | 14 June 2019

There are likely to be many more Company Voluntary Arrangements (CVAs) for retailers following the recent agreement for the Arcadia group as the sector’s problems continue according to a leading insolvency practitioner. Eileen Blackburn, head of Restructuring and Debt Advisory at French Duncan LLP, said that the issues which led to the Arcadia CVA persist across large parts of the retail sector and highlight the need for a review of the whole sector and the way in which rents and rates are charged.

As Eileen explained: “The Arcadia group represent the latest in a long line of retailers which have had to persuade their landlords to accept lower rents to safeguard the future of the business. While this CVA has saved some stores from closure there remain serious infrastructure problems within the retail sector which will cause further closures if action is not taken.”

“It is understandable that landlords are reluctant to accept lower rents but equally there needs to be some understanding of the pressures that the sector now faces and the very real likelihood that many more stores will go out of business in the next few years. It is surely better for landlords to accept 50% of something than zero per cent if the stores go out of business.”

Eileen continued: “In Scotland the retail sector had its highest ever quarter for insolvencies in the first three months of 2019 with 28 retailers entering insolvency which is already over 40% of the entire figure for 2018. The sector is not so much at breaking point as having gone beyond that and is simply collapsing. Without immediate action on rents and business rates many retailers will enter insolvency in the coming months.”

“What is required is an overhaul of the way in which the High Street operates to diversify the offering from straightforward retail to provide other services. The Mayor of the West Midlands, Andy Street, the former boss of John Lewis, is attempting to revive the fortunes of places like Walsall by looking at rents, rates, transport, diversifying the offering from straightforward retail and a similar process could be helpful in Scotland. With too much retail stock, inflexible rents and rates, and a sector that has yet to wake up to the reality of the High Street in 2019 there needs to be imagination, and a sympathetic and creative approach to regenerating the centrepieces of our towns and cities. Nobody wants to have a rundown town or city centre and all of those involved from landlords and councils to retailers and operators need to act to prevent the continued collapse of so many retailers both national and local.”

Eileen concluded: “It is clear that some retailers haven’t adapted to the changing marketplace, but it is also abundantly clear that many landlords and councils have also failed to keep up. The latter still want to charge rents and rates at boom time levels when the market simply isn’t there to sustain them. 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.”

Click here to see Eileen's profile and contact details



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