More than a quarter of Midland retailers are in the ‘caution’ or ‘high risk’ category in terms of likelihood to fail in the coming year, according to an insolvency trade body.
R3 predict more Midlands retailers are likely to face significant financial problems following the passing of the Quarter Day deadline on June 24 for quarterly commercial property rent payments.
According to R3 research 26 per cent of retailers are in the ‘caution’ or ‘high risk’ band in the next twelve months.
This latest rent debt could prove the final blow for many in a sector which has suffered more than 21,000 job losses in the UK since the start of 2011, mostly due to difficult economic conditions and the rise of internet sales.
R3 Midlands chairman Matthew Hammond, a partner at PwC in the Midlands, said: “Quarter Day will always present a challenge to struggling retailers, particularly as some will have expensive, long-term leases which were agreed in more positive economic times.
“In such instances, negotiating with landlords is absolutely key to staving off insolvency.
“An increasing number of businesses are attempting to pay rent on a monthly basis, or even negotiating turnover-linked rents to help them manage their cash flow more effectively.
“Embracing the communication and selling power of the internet is also fundamental to retail survival.
“A 12 per cent drop in High Street footfall in the year to April reinforces the fact that many retailers have to adapt, and continue to adapt, their businesses to remain trading.”
With the threat of further casualties in the retail sector, R3 is also calling on the Government to help save jobs and creditor funds by giving greater clarity on the issue of property rent due in the event of an insolvency.
Mr Hammond added: “Currently, when an administrator continues to trade a company, advance payment for a quarter’s rent is required even though an administrator might only be using the premises for a short period of time.
“The net effect of this rule, which is a relatively new one, means it is often harder to trade a business during an administration.
“More failing businesses may be saved if the Government would once again sanction payment on a daily usage basis for premise occupancy.”