Surge in Portsmouth firms filing for insolvency during lockdown, research finds

FIGURES have shown a huge surge in the number of businesses filing for insolvency compared to last year, with many firms kept afloat by government funding fear they will go insolvent coming out of lockdown.

Analysis conducted by the BBC’s Shared Data Unit shows around 5,000 companies have filed for insolvency since March, down compared with 6,500 last year, as government funding meant they went into effective hibernation.

In Portsmouth, 13 businesses filed for insolvency during lockdown between March 24 and June 30 compared to just six last year.

In Fareham seven did, compared to three last year, in Gosport two did compared to one, and in Havant eight did compared to just one last year.

Companies working in information and communication had seen the largest increase in insolvencies.

In separate research, Begbies Traynor said 527,000 businesses were in significant financial distress at the end of June and the true impact would only be seen in months to come.

Partner Julie Palmer said: ‘This crisis will force many zombie companies out of business. While these were clinging on to survival prior to the pandemic, many will now have become simply unviable due to high levels of debts and poor sales.’

This news comes despite the government spending around £160bn in support for businesses.

Economic support has ranged from loans to business rate relief, tax deferrals, top-up grants, a future fund for blue chip companies and the Bank of England issuing bonds to corporations.

However, it is not all doom and gloom, as the research also found a resurgence in new businesses being set up during lockdown, with around 180,000 companies registering in the UK from April to June.

In Portsmouth 408 new businesses were registered, 226 in Havant, 174 in Fareham and 78 in Gosport.

One of those was Sherlock’s, a bar in Clarendon Road, Southsea, which opened on July 4. It was set up by Richard Peckham and Debbie Moorhead.

Richard said: ‘All our friends and family thought we were a bit mad to set up a business right now but we felt that it was a good time as people were out of their normal habits. It has been really good so far.’

Richard also runs a marketing company called Portsmouth Flyers and Debbie is a hairdresser.

Richard said: ‘Both of those jobs came to a grinding halt during lockdown so it gave us six clear weeks to get the bar ready.’

Source: portsmouth.co.uk


Rules on insolvency ‘must be eased to prevent flood of bankruptcies’

Britain should prepare its courts for a flood of bankruptcies in the next few months and needs to liberalise its insolvency system to prevent viable businesses from going bust, a senior American economist and policymaker has warned.

Randall Kroszner, who sat on the Federal Reserve’s board of governors during the financial crisis, said that policymakers should take a pragmatic approach to corporate insolvency to protect jobs and to preserve as much economic value as possible.

He urged politicians to avoid being seduced by false hopes of a swift, V-shaped, recovery. “Of course politicians are reluctant to look to the negative,” he said. “Everybody wants a V and if you have a V you don’t have to worry about widespread bankruptcy and restructuring. But we have to acknowledge that this might be the case, so it’s important to be prepared for that and to minimise the damage.”

Governments around the world have begun to adapt insolvency laws to try to mitigate against the consequences of an expected surge in business failures. In March, Britain suspended laws on wrongful trading, allowing directors to keep technically insolvent companies open during the pandemic without fear of legal action. Under wrongful trading laws, directors can be sued for failing to wind up a company if it is running out of cash and facing insolvency.

Nevertheless, politicians and bankers are braced for a wave of business failures. Companies have borrowed billions of pounds through government-backed loans and economists are warning that many will collapse under of unsustainable debts if economic demand does not recover quickly enough.

Professor Kroszner, of the University of Chicago’s Booth School of Business, said that a relaxation of the insolvency rules could help to protect jobs and economic activity. “Given the number of bankruptcies are likely to go up quite significantly, it can be better for the economy and better for the debt-holders to not [wind down the business] and to do a restructuring that maintains employment,” he said.

“You won’t have the same liquidation and everyone being turned out of work. You can say, ‘OK, there’s a solid operation here with a high debt, so we want to restructure the debt burden but we want to maintain the underlying economic activity.’ That’s good for the economy, good for the workers and good for the bond-holders.”

He said that a good bankruptcy system was able to distinguish between unviable, or zombie, companies and those that would have survived were it not for Covid-19. Professor Kroszner, 58, drew on the example of Chapter 11 proceedings in the United States, which allow businesses to operate while paying creditors through a restructured payment plan and for directors to continue to run the business. Governments worldwide have borrowed from Chapter 11, but many of the benefits are available only in America.

In May, Chapter 11 proceedings in the US soared by 48 per cent, prompting bankruptcy experts to warn of potential delays in processing claims. They said that many viable businesses would be forced into liquidation prematurely if backlogs grew excessively. A group of academics wrote to Congress, urging policymakers to hire more clerks and to bring judges out of retirement.

Professor Kroszner said that British courts would face similar challenges. “Having a very effective and efficient bankruptcy, where you have expedited bankruptcies and sufficient resources in the legal system, is very important,” he said.

 

Source: Business Matters


The new corporate insolvency and governance bill: does it make moratorium better

In recent months, the UK accounting industry has become enamoured with talks of refining the moratorium process to generate a more debtor-friendly experience.

As businesses continue to recover from the recent pandemic and get their operations back on track, debtors have continuously urged the government to rework their moratorium process for favourable conditions. Amid talks of ease and revisions, however, lawmakers and accounting firms alike have also raised new questions over the practicality of a new mortarium because of practicality issues rooted in UK insolvency.

A new approach to the moratorium process

Recently, the government introduced the revised and debtor-favourable version of the moratorium process in the form of the Corporate Insolvency and Governance (CIG) bill.

With its recent release slated to be far more favourable for the terms and conditions that debtors seek in these times, insolvency practitioners have looked to the update as an effective means of balancing concerns out. Among the new additions that the CIG bill has brought about, however, the scope of the “monitor” position has been received with much concern as its structure poses a potential hindrance to the bill’s use.

Throughout what was considered by many practitioners as one of the quickest examples in history, the CIG bill was enacted in just a little over a month— but some say it may have been too soon. Now that the revisions are in effect, UK insolvency law is currently in the process of adjusting to different temporary and permanent changes that include a new moratorium process.

Generally speaking, the new process is distinguishable from past iterations because it allows firms in a distressed position or situation to review their financial health. This revision, in turn, yields a distinct form of board creditor protection from any legal implications during the process wherein a firm assesses the viability of their business and its chances of recovery.

How the new bill’s effects on moratorium may be a stepping stone to improvement

Regarding figures, the new moratorium revision seeks to provide companies in troubling finance waters around 20 working days worth of breathing space upon initial filing. This breathing room period, however, can also be extendable anywhere between an additional 20 working days or an entire year— which is primarily subject to the approval of creditors.

According to R3’s former president Duncan Swift, the former leader stated that “The moratorium is an opportunity for the company to assess the financial circumstances that it finds itself in.” The professional also cleared up that the new moratorium isn’t tied to a formal insolvency process— allowing more breathing room and flexibility for companies looking to assess their situation.

Additionally, Swift defended the new revisions and their effect on the practicality issues of UK insolvency: “This free-standing moratorium gives management more time to consider the options available and not to have ‘pre-decide’ whether to go in administration or into a company voluntary arrangements (CVA).”

A big-four take on the current revisions

In terms of a Big Four firm’s take on the new CIG bill update and its underlying moratorium revisions, KPMG’s global head of insolvency Blair Nimmo believes such an update is favourable.
According to Nimmo, the moratorium process provides another viable option that insolvency practitioners can utilise to save a business with potential from financial demise. Attesting the claim that this revision leaves room to manoeuvre, the global head of insolvency further expressed her favour of the CIG bill’s moratorium revision, stating:

“It would be horrendous for businesses to fail simply because they didn’t have a period to properly pursue different solutions, such as the sale or refinance of the businesses, whether it’s a [renegotiation] of a contract, or new creditors, etc. It would be bad if a perfectly viable business fell because of lack of time.”

Conclusion

As businesses continue to struggle with staying afloat amid the COVID-19 pandemic and are now forced to consider filing for insolvency, the new GIC bill seeks to provide a solution that works. With its renewed take on the moratorium process, the piece of legislation seeks to assist businesses as they get through this tough time.

If you’re looking for more accountancy news in the UK, visit our site today!

Source: Accountancy Today


Business Financial Distress UK

HS2 college at risk of insolvency seeks partner

The national college for HS2 is on the hunt for a provider to partner with following a grade four Ofsted report and warnings from the FE Commissioner it was facing “potential insolvency”.

The National College for Advanced Transport and Infrastructure (NCATI) told FE Week it was “working through a shortlisting process for a new partner” after it was late submitting financial statements for 2018-19.

A spokesperson said a new partner would “help us deliver the NCATI vision and improve quality”, and following the shortlisting process, NCATI plans to “embark on an open public consultation”.

He said they “remain confident” they will be able to “fulfil our ambition to train and upskill a broad and inclusive generation of talent from across the country”.

NCATI refused to go into more detail about what the partnership would mean for the future of the college, or who the potential partners are.

This isn’t the first time a troubled national college has had to partner with other providers. The National College Creative Industries (NCCI) partnered up with two local providers and then dissolved itself earlier this year, having swallowed a £600,000 bailout from the Department for Education to make it through 2017-18 as a “going concern”.

Access Creative College took over NCCI’s apprenticeships provision and South Essex College took over its classroom provision while NCCI restarted as a limited company.

NCATI, then known as the National College for High Speed Rail (NCHSR), took £4.55 million from the DfE to sign off its 2017-18 accounts.

NCHSR was opened in 2017 by then-education secretary Justine Greening with £40 million in capital funding from the Education and Skills Funding Agency to purchase equipment and construct facilities.

It became the National College for Advanced Transport and Infrastructure last October.

The college was engulfed in controversy at the start of 2020 when FE Week broke the news it had hired lawyers to stop a grade 4 Ofsted report from November being published, through a judicial review in the High Court.

NCATI eventually dropped its legal challenge at a cost of £73,000 and the report was released last February, revealing that employers were having to teach apprentices skills that were not covered by the college.

The FE Commissioner Richard Atkins intervened in the college in December, finding it would not be able to sign off its 2018-19 accounts as a going concern “without a commitment of 12 months of continued emergency funding”. He had instructed the board on how to operate while facing “potential insolvency”.

Atkins found NCATI had also based its 2019-20 budget on having 761 apprentices and 263 full-time learners, whereas in December 2019 it only had 216 apprentices and 94 other full-time students.

NCATI was placed in supervised status and since then has been undertaking a structure and prospects appraisal (SPA) with the commissioner.

To ensure this SPA process “is thorough and comprehensive”, NCATI agreed with ESFA to not file completed financial statements for 2018-19 until the culmination of the SPA, the spokesperson said.

A DfE-commissioned report published in February criticised how the national colleges were set up as standalone institutions, saying: “More detailed consideration could have been given to other models such as evolving new institutions from existing education and training providers”.

The report found NCATI had struggled with learner numbers due to delays in announcing HS2 contractors, which meant employers were unable to commit to the apprentice volumes they had originally anticipated.

Source: FE Week


UK shops reopening provides relief for retailers, although insolvency worries loom

The re-opening of shops has provided much-needed relief for retailers in the past two weeks, although a large number are thought to be in financial distress as Covid-19 has caused shopper numbers to slump.

Footfall was down by more than 50 per cent year-on-year in the last week of June, said the British Retail Consortium (BRC). Neverthless, this was some improvement on a dire May, when footfall was down 82 per cent.

Shops reopened on 15 June in England after a three-month lockdown to help slow the spread of the coronavirus.

“Consumers have benefited as shop prices have fallen for the 13th consecutive month. However the situation for many retailers, such as those in clothing and footwear, remains very challenging. Sales have dropped significantly since mid-March and two thirds of businesses are reporting turnover below pre-crisis levels, meaning there is a serious risk to jobs as a result,” said Helen Dickinson, chief executive at the BRC.

Insolvency risk

Separately, it is feared 35 per cent of businesses in the UK are at risk of insolvency – with retail and hospitality firms the most at risk.

In a poll by consultancy The Centre for Economics and Business Research, 17 per cent of firms said there was a moderate to high risk of going insolvent, with a further 18 per cent reporting to be in some financial distress.

However, economists said it was encouraging that 65 per cent of respondents felt there was no risk of collapse.

Hospitality businesses should also feel some relief this weekend when pubs, bars, restaurants and hotels are allowed to re-open. According to the RAC, around 10 million drivers will take to the roads this weekend to celebrate the easing of lockdown on 4 July.

James Endersby, chief executive at data firm Opinium, said: “A light at the end of the tunnel does appear to be surfacing for some businesses across the country – with current trading conditions and future prospects both improving.”

The hospitality and tourism industry employs around 1.6 million people across 127,000 businesses, according to the British Hospitality Association. The retail sector employs some 2.9 million people across 208,000 firms.

Economic contraction worst in 41 years

Official figures showed on Tuesday the UK economy contracted an annualised 2.2 per cent in the first three months of the year.

The Office for National Statistics said it was the joint largest fall since 1979, and this barely covered the coronavirus crisis as lockdown was brought in towards the end of March.

Recent ONS figures showed the economy plummeted by 20.4 per cent in April – the largest drop in a single month since records began.

Source: inews


UK mall operator Intu collapses into insolvency. Thousands of jobs are at risk

Britain is already facing its steepest recession in 300 years, and expected to suffer the worst coronavirus-induced slump of any major economy this year. It's also risking a rupture with its single biggest trading partner, the European Union, if a new trade deal is not agreed soon.

Tens of thousands of jobs have already gone in energy, banking, aviation and aerospace and now many more are at risk after Intu (INTU), one of the United Kingdom's largest shopping mall owners, said Friday that it is entering administration. The company has debts of £4.5 billion ($5.6 billion) and was unable to agree repayment holidays with its creditors. Its shares, which have been on a downward trajectory for several years, plunged 54% on Friday before they were suspended.

Intu owns 17 UK shopping centers and two in Spain, accommodating 800 brands and 400 million shopper visits a year, according to the company. These centers will remain open during the insolvency process and individual retailers will have to enter transitional agreements with the administrators, KPMG.

But UK retailers are themselves suffering from a collapse in sales and many have been unable to pay rent for the upcoming quarter, raising questions as to how many of the shopping centers can realistically afford to remain open.

Just 14% of the rent owed by UK retailers for the third quarter of this year was paid on June 24, the due date, according to property management platform Re-Leased.

"We expect there will be more pressure to come," Re-Leased CEO Tom Wallace said in a statement Friday. "The temporary ban on evictions for non-payment of rent and the government furlough scheme is providing a lifeline to many tenants at the moment, but those measures will not last forever," he added.

Intu said it received just 29% of second quarter rent from tenants, down from 77% for the same period last year. Intu, which employs 2,600 people, was in a tight spot going into the pandemic. It posted a £2 billion ($2.5 billion) loss last year.

News of its collapse into insolvency will come as a particularly bitter blow to retailers because it coincides with a loosening of lockdown restrictions in the United Kingdom that has allowed stores to welcome customers again for the first time in months.

Brands such as Zara and H&M (HNNMY), which have already suffered steep sales declines this year, have outlets in malls owned by Intu. H&M said Friday that worldwide sales fell 50% from March through May, while Zara owner Inditex, the world's biggest clothing retailer, reported a 44% drop in sales for the three months to March. Both brands plan to accelerate store closures and a shift to online retailing — one of the few bright spots in the pandemic.

Only grocery stores and online retailers have dodged the slump in UK retail sales over the past few months, with the pandemic accelerating a move to e-commerce that was already hurting physical stores. Both the volume and value of retail sales suffered record declines over the three months to May, falling by 14% and 13%, respectively, when compared with the previous three months, according to the Office for National Statistics.The proportion spent online soared to the highest on record in May at 33.4%, breaking April's 31% record, according to ONS.In the United States, several major chains, such as JCPenney and Neiman Marcus, have already filed for bankruptcy and as many as 25,000 physical stores are expected to permanently close this year, driven partly by the continued shift to online shopping, according to Coresight Research. More than half of the store closures are expected to come in malls.

Source : CNN Business


IAG airline Level Europe files for insolvency

Austrian short-haul budget carrier Level Europe plans to file for insolvency, it said on Thursday, becoming the latest airline casualty of the coronavirus crisis despite the financial might of parent IAG <ICAG.L>.

The small airline, previously known as ANISEC, began operating in 2018. It has six Airbus short-haul jets and is part of IAG-owned Vueling Group.

British Airways owner IAG also operates a long-haul airline called Level, which is separate from Level Europe, an IAG spokeswoman said.

Level Europe blamed the COVID-19 pandemic for its move to cease trading, joining a growing list of airline failures after planes across the world were grounded for months during coronavirus lockdowns.

Anglo-Spanish group IAG, which also owns Iberia and Aer Lingus, said in April that it had 10 billion euros (£9 billion) of liquidity, but Chief Executive Willie Walsh has said it is burning through cash as the crisis continues and has warned that British Airways is "fighting for survival".

British Airways has said it needs to axe 12,000 jobs.

While IAG's airlines have used furlough schemes and accessed government-backed loans, they are not in line for government bailouts like European rivals such as Air France-KLM and Lufthansa.

An administrator will be appointed once insolvency proceedings have been filed, Level Europe said in its statement.

Source: Yahoo Finance


Insolvency law shake-up will hurt UK pensioners

Sector says that emergency measures hand too much power to banks
The UK pensions industry has warned that emergency measures aimed at helping struggling businesses during the coronavirus pandemic could leave millions of pensioners worse off. In recent weeks the Pensions Regulator, the Pension Protection Fund and trade bodies representing retirement schemes have raised concerns with the government that the Corporate and Governance Insolvency Bill could have serious unintended consequences for retirement plans and their members.

The legislation, which is being fast-tracked through parliament, aims to ease the burden on businesses hit by the Covid-19 crisis by giving them breathing space of up to 40 days to pursue a rescue plan. During this period they are shielded from legal action and paying debts, including those pursued by the Pensions Regulator for unpaid contributions.

However the pension industry fears that, in its current form, the bill hands too much power to creditors like banks at the expense of pensioners, in the event that a company goes bust with a big pension deficit. “This new moratorium will make recovering unpaid pension contributions even more difficult than the current situation,” said the Pensions and Lifetime Savings Association, the trade body which represents more than 1,300 workplace pension schemes.

“By the time action can be taken, it may be too late for a DB scheme or the PPF to recover anything.” The PPF is a statutory lifeboat scheme that is intended to protect members if an employer sponsoring a defined benefits pension plan becomes insolvent. With the new legislation, a concern for the pension industry is that the proposed moratorium risks blowing out an existing pension funding hole, with trustees in a weaker position to recover unpaid contributions.

Currently, if a business goes bust with an underfunded defined benefit pension plan, the scheme has a right to seek funds from the insolvent company with the pension debt ranking alongside other unsecured creditors such as bank loans. But the draft bill would “dramatically alter” this by giving lending debts that fell due during the moratorium period “super priority”, according to the Society of Pension Professionals, a trade body — effectively pushing pension schemes further down the creditor queue.

“The result is that on a restructuring or insolvency, other unsecured creditors, including defined benefit pension schemes, may suffer materially worse recoveries,” the SPP said in a letter sent to the government this week. “This outcome will inevitably lead to more pensioners not receiving their benefits in full and greater strain on the Pension Protection Fund.”

The trade body said the new measures raised the “serious risk of systemic dumping” of DB pension schemes by financially distressed companies because the proposals weakened the influence of both trustees and the PPF during restructuring talks. “Currently, trustees and the PPF are able to get a seat at the table during restructuring talks, but it is more difficult for them to do so under the new rules,” said Tiffany Tsang, senior policy lead on DB schemes at the PLSA.

Since 2005, the PPF has recovered more than £3bn from failed businesses. This cash has been used to help fund compensation payments to hundreds of thousands of members transferred to the pensions lifeboat, which is mostly funded by a levy on solvent schemes. A PPF spokesperson said: “We’re working closely with [the] government to address the concerns that have been raised about specific provisions in the bill, and to make sure pension schemes and the PPF aren’t disadvantaged.“

A spokesperson for the Pensions Regulator said: “We can confirm we are working closely with the government and the Department for Business, Energy and Industrial Strategy and we are very mindful of the concerns the industry have expressed around the Corporate Insolvency and Governance Bill.” The government said: “This legislation, widely supported by business groups, will help companies through the Covid-19 emergency by giving firms essential breathing space to seek a rescue – ultimately, preserving jobs and livelihoods. “We are working to ensure that pension schemes are not disadvantaged by these important measures.”

Source: Financial Times


UK insolvency law poses hefty losses for government-backed loans

The UK government could face hefty losses on loans made to struggling businesses during the Covid-19 pandemic due to its new insolvency law that can force lenders to accept unfavourable terms during a debt restructuring process.

The new ‘Restructuring Plan', part of the government's Corporate Insolvency & Governance Bill being debated in parliament this week, empowers one class of creditors to force a debt restructuring plan on another class of creditors, in what is known as a cross class cramdown.

It therefore gives a majority of creditors the power to force a debt restructuring onto a single class of creditors who do not agree with it.

This could result in the government having to accept debt write offs on Coronavirus Business Interruption Loans (CBILs) and Coronavirus Large Business Interruption Loans (CLBILs), which are 80% guaranteed by the government.

“We expect to see restructurings in the second half of the year that include these (government guaranteed) bank loans,” said one restructuring lawyer. “Under the new laws you can now cram down a single class -- it would be ironic if this class was these loans.”

The new law requires 75% of lenders, based on value across all the classes, to approve a debt restructuring. This is a far lower hurdle to overcome than the current UK scheme of arrangement system, which requires 75% by value and 50% of creditors in each class to approve the plan before it goes to court. The new law has the ability to cram down a dissenting class unlike the old system.

SUSCEPTIBLE

Some £8.9bn of CBILs were approved by the end of May, providing small and medium-sized businesses with loans of up to £5m each. The vast majority of the loans are unsecured and sit lower down the capital structure, making them susceptible to the will of higher-ranking lenders.

“There is no carve-out in the bill for CBIL loans, and so yes, they could be written down as part of a restructuring. The bank that provided the CBIL loan would be able to rely on the government for a shortfall of up to 80% of the loan,” a second lawyer said.

The loans could be written off completely or they could end up as part of a debt for equity plan, with the government left holding equity stakes in businesses.

“I think a lot of CBILs will be converted into equity – the government could end up the largest minority equity holder in the UK,” a second lawyer said.

 SLOW TAKE-UP

CLBILs, which provide larger corporates with loans of up to £200m, will mainly be secured. As they will rank on an equal basis to existing senior secured lenders, the debt is less likely to be crammed down.

However, the situation is complicated by the fact that existing senior secured lenders have to agree to a dilution of their security when a company takes a CLBIL. Restructuring advisers believe this is why the take up of these loans has been so low, with only 154 agreed so far.

It could also create a more complicated restructuring process where senior secured lenders become pitted against each other.

“Normally secured lenders would form one class in a restructuring, but there is scope for gerrymandering where some secured lenders form a different class and try to override another,” a third restructuring lawyer said.

Under the new bill, there are some safe guards against this as a court has to be satisfied that none of the dissenting classes would be any worse off under the plan than they would be in the event of an alternative process such as a liquidation.

However, the final approval of the plan lies with the judge.

 “It is a bit of a blunt instrument as it is. It will come down to how competent a judge is in understanding what is fair and what the motivations are of the different classes of creditors,” a fourth restructuring lawyer said.

Source: Yahoo Finance

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Record number of retail insolvencies in first quarter of 2019

Fears over the continuing crisis of high street stores in Scotland is evident after the retail sector experienced a record number of failures in the first quarter of the year.

New research from the Insolvency Service found 28 Scottish retailers filed for insolvency in the first three months of 2019. Having collated data since 2007, this is the highest figure recorded, with the third quarter of 2012 previously being the worst number of retailers going bust at 27.

While shop owners are facing the soaring costs in business rates, wages and utilities, customers are being drawn away from adding to retailers’ footfall and towards the endless shopping services now available online.

A survey by Local Data Company (LD) revealed 265 stores were closed in 2018 across eight Scottish towns and cities: Aberdeen, Ayr, Dundee, Edinburgh, Glasgow, Falkirk, Paisley and Perth. With only 146 stores opening in the same period, this was a net change of minus 119 on the high street.

With high street retailers struggling to compete with online shopping, several retailers are turning to company voluntary arrangements (CVAs) to scale back their physical presence and minimise rent bills.

At the end of April, the UK’s biggest department store chain Debenhams announced its plans to close 22 stores – one of which is located in Scotland – putting 1,200 jobs at risk. Debenhams was put through a pre-pack administration that wiped out the investment of shareholders, including Mike Ashely, the founder of Sports Direct.

For the 26 weeks to March, sales in the Debenhams stores fell 7.4 per cent. Its new owners, who are a consortium of banks and hedge funds, launched the major store-closure programme via a CVA. The CVA will allow them to renegotiate rents at the remaining stores across the UK. It has been said that 39 stores will stick to their current rental rates for the duration of their leases while the company aims to secure rental reductions of between 25 and 50 per cent for the remaining stores.

The announcement from Debenhams is just the tip of the iceberg. Last year saw House of Fraser closing stores after being bought out of administration, while Marks and Spencer is currently in the process of shutting 100 stores by next year.

The number of vacant retail units in Scotland is higher than the UK average, with recent economic figures suggesting consumer spending has slowed over the past two years. Named brands such as Carpetright, Homebase and New Look opted for CVAs, while companies like Fabb Sofas, Maplin and Toys R Us ended up in administration.

However, according to recent research from Savills, the number of empty retail units that were let out in Scotland last year was 82; eight per cent up on the long-term average. These vacant units were snatched up by chains such as Aldi and Lidl, with Homestore & More securing stores at Craigleith Retail Park in Edinburgh and Mavor Avenue in East Kilbride.

Mike Spens, Director of the out-of-town retail team at Savills in Scotland, concluded:

“Corporate failures in the retail sector in the last 12-18 months have released space onto the out of town retail market and allowed for a greater churn. This has created an opportunity for brands such as Home Bargains and the discount food retailers to expand across Scotland and for new entrants to secure representation.”

Despite this, accountancy firm, French Duncan, believe the pressures on the retail sector could result in 2019 being a record year for retail insolvencies in Scotland.

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