With retail insolvency hitting a 5 year high it’s no wonder the prospects for the sector are still looking bleak heading into 2020. As stores start cranking up their pre-Christmas discounts, many shopping centres are struggling from an exodus of big-name brands.
The Gracechurch Centre in Sutton Coldfield is the latest example of this, with the likes of Patisserie Valerie, M&S and Paperchase all closing within the shopping centre over the last few months. Centres throughout the UK have continued to feel the pressure of the ongoing retail crisis that so far claimed 85,000 jobs and thousands of stores over 2019.
Now investors have started to feel the negative effects of a sector in trouble. As M&G, one of the largest property funds, placed a temporary ban on withdrawals. M&G admitted they couldn’t sell properties at a fast enough pace to repay investors who wanted out.
Without a doubt the uncertainty created by Brexit has had a profound effect on the retail sector. M&G blamed this, along with structural shifts in the sector, on investors wanting to leave.
The traditional bricks-and-mortar stores used to be predictability reliable for investors, thanks to retailers who could pay the rent and there being plenty of shoppers. However, market conditions have deteriorated, thanks to things like the increase in online shopping, rising business rates and shoppers turning away from the high-street.
Unfortunately, retailers going through tough times due to all this uncertainty isn’t news to anyone. Over the last couple of years, a string of well-known names have resorted to rescue deals just to stay in business; from House of Fraser to card retailer Clintons. Even Marks & Spencer have felt the effects of online competition, dropping out of the FTSE 100 this year.
The need for warehousing space has continued to rise, in order to handle the ever-increasing demand from web orders. It’s fair to say that the future of shopping centres and retail parks is so uncertain thanks largely to the on-going march of the internet. 1 in every 5 pounds of retail spending in the UK is now done online, which is twice the amount compared to a decade ago.
It’s not all bad news, as more upmarket centres are still seeing some decent sales in certain locations. However, the property industry has stated that out of the 111m sq metres of shop space in the UK, almost a third (30%) of it is now redundant and needs repurposing into leisure, hotel and housing properties.
What happens now?
Unfortunately no one seems to know when the turmoil will calm. The head of retail and industrial research at EG magazine, James Child, has stated that the last 6 months have been the worst on record for retail investment: “UK shopping-centre investment has plummeted by more than 50% this year, compared with the same period in 2018.”
Last year, Fidelity International issued a warning that if prices caught up with the reality the retail sector is facing, then the value of UK shopping centres and retail parks could plummet by as much as 20 to 70%. The investment management services company suggested that business rents needed cuts of 10 to 40% to make things more affordable and sustainable for retailers on the high-street.
Are you now looking to close your business?
If your retail business is struggling with mounting debts and you’re seeking a way to delay or reduce payments, then you could benefit from a Company Voluntary Arrangement (CVA). A CVA can put control back in your hands, allowing you to take care of business debts and secure the future of your retail business.
Alternatively, you could opt to go through a Creditors’ Voluntary Liquidation (CVL). This is where your company will be formally liquidated, while all your legal obligations as a director are fulfilled. You’ll be able to fully protect the interests of creditors and limit your own personal liabilities. And with Clarke Bell, a CVL is from just £2,995 (all inclusive).
As economic uncertainty continues to rise, don’t delay in getting the professional help you need – get in touch with our friendly and highly experienced team today.