A Midland insolvency practitioner is urging retailers in financial difficulty to seek advice early after research suggested that more than 20 household retail names are likely to disappear from the high street early next year.
James Martin, chairman of insolvency trade body R3 Midlands, said a survey of the body’s members showed that more than 80 per cent of practitioners believe that a decrease in spending this year will push many retailers into insolvency in early 2010.
This comes despite improving sentiment on the state of the economy and rising sales figures.
Mr Martin, who is also a partner at the Birmingham office of Begbies Traynor, warned that store-owners should prepare for “New Year bloodbath”.
He added: “The insolvency profession believes we are set for a repeat of last year’s clear-out on the high street, with 23 well-known retailers predicted to face the same fate in the first few months of 2010 as those at the start of 2009.
“The New Year period is a particularly devastating one for retailers, with 90 per cent of R3’s insolvency experts saying that retailers deliberately delay starting insolvency proceedings until the New Year, hoping they will recoup enough money over the festive period.
“More than half of our members believe creditors also hang back, hoping they’ll receive higher returns due to increased takings over Christmas.”
Compounding these factors, three quarters of insolvency professionals surveyed believe rising unemployment will result in less consumer spending.
The vast majority predict this decrease in spending will, in turn, push many retailers into insolvency in early 2010.
Signs of economic recovery are also unlikely to help retailers. Over three quarters of insolvency experts believe this will prompt creditors to start acting more aggressively, as assets rise in value.
Mr Martin added: “Rising unemployment and decreased spending in the lead up to Christmas coupled with heightened creditor aggression in the New Year leaves the retail sector facing another bloodbath.
“While it would be comforting to think that the worst of the downturn is over, it’s worth remembering that insolvency peaks after a recession ends.
“We urge retailers to seek advice early when there is a better chance of rescue, rather than desperately clinging on, hoping that Christmas will cure all ills. The recent case of creditors agreeing a CVA in the case of Blacks Leisure shows there are insolvency and rescue procedures available to stave off liquidation. These procedures could help many businesses currently in the ‘at risk’ zone.”