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25/03/2013

Rent quarter day warning from R3

Monday is the deadline for quarterly rent payments, where three months’ rent is paid in advance for commercial and retail properties. Recent R3 research shows that on in ten retailers are struggling to pay their debts as they fall due, indicating that this quarter’s rent day could cause a number of administrations in the retail sector.

Many retailers are in a precarious situation with one in ten existing as a ‘zombie’ business: that is businesses only able to pay the interest on their debt but not the debt itself. They are being kept alive by the forbearance of banks, other key creditors and favourable interest rates, which is enabling them to stay afloat but quarter day could be the last straw for them if there is no additional facility to go into further debt.

Lee Manning, R3 President comments:

“Christmas Sales were lower than expected for many retailers, including the anchor stores that usually do well whatever the conditions. Marks and Spencer like-for-like UK sales in the 13 weeks to 29 December fell 1.8% on the same period a year earlier. Combining poor Christmas sales with the extended period of severe weather, which has hit post-Christmas retail sales, this rental quarter day could not come at a worse time for many retailers.

“The high street is experiencing wholesale changes as a result of the declining retail sector. It is being hit by a two pronged attack. First, technology and the internet are challenging the high street beyond what most shops have been able to cope with. Second, the significant expansion of out-of-town shopping centres has made it almost impossible.

“The delivery method of many high-street products has been challenged fundamentally by technology; the demand for physical goods purchased from a high street has plummeted as people can buy more easily and cheaply online. Restrictive parking regimes and stringent ticketing practices have made popping down to the high street to pick something up in a relaxed way a thing of the past. Retailers with enough financial clout have moved out. This has meant “anchor” stores deserting the high street, in turn making high streets less attractive and creating a vicious cycle of decline. Computer games, cards and clothes shops have been replaced by payday loan providers, pound shops and bookmakers.

“If retailers do enter administration it does not have to be the end of the road. They can adapt. Our flexible insolvency regime has allowed many insolvent retail businesses to emerge from administration with some jobs or stores intact, typically about half the jobs and stores survived in 2012.

“Retailers need to be nimble and innovative and, very simply, alive to, and adapt to, what their customers want. As shopping habits change, so too must retailers. This means multi-channel buying – not just static physical or internet buying but innovations such as mobile shopping too. Retailers need to recognise online does not have to be completely divorced from bricks and mortar. “Click and collect” has given a boost to stores such as Argos. John Lewis has excelled in using technology to get people in their shops.”
For further information please contact:
Charlotte Towerton, R3 External Communications Officer
t: 020 7566 4203 m: 07918161 291 e: charlotte.towerton@r3.org.uk
Will Black, R3 Communications Manager
t: 020 7566 4215 m: 07917 422 485 e: will.black@r3.org.uk

Methodology note: BDRC Continental conducted 501 telephone interviews with small, medium and large business owners and Financial Directors between 5th - 12th November 2012. Strict quotas are set by size, region and sector and the data weighted to be representative of the ONS profile of UK businesses, each with an annual turnover above £50,000. The respondent in each case is a senior financial decision maker. (Previous survey, 6th-13th June 2012)
Notes to editors:
– R3 is the trade body for Insolvency Professionals, and is made up of 97% of the UK’s Insolvency Practitioners.
– R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by one of nine recognised professional bodies.
– R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals. Website www.r3.org.uk

 

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.