Rental obligations to hit struggling retail sector

20 June 2011

The extreme weather that hit the UK earlier this year may just be a distant memory, but insolvency experts are warning that the big freeze might still have something nasty in store for the retail sector.

Frances Coulson, R3 President, was speaking in advance of the next 'quarter day,' (24th June 2011) on which rents for commercial property are traditionally paid.

A number of high profiles firms have gone into administration on these days, which fall in March, June, September and December, over the last three years, especially in the retail sector, as it has become apparent that they don't have the funds needed to meet their property rental obligations.

In March this year, The Officer's Club went into administration for the second time for this very reason, and Frances Coulson believes that more businesses could follow suit this time round due to the impact that the extended cold snap had on trading conditions in the High Street.

She says: "Trading conditions have clearly been extremely tough for many retailers since 2008, and after hanging on through the worst of the recession, the heavy snow that we all endured through the winter could well turn out to be the straw that breaks the camel's back.

"A lot of firms used the last of their resources to make it past the March payment date. With the latest figures showing a fall in retail sales, it is clear that there has been little improvement over the last three month. We could well see another swathe of retailers reaching the end of the road when the quarterly rental payments fall due.

"R3's research into consumer spending found that close to a third of consumers (31%) are doing more shopping online, with one in five (22%) admitting to buying non-essentials in supermarkets rather than specialist retail chains.

Coulson advises firms that think they might be facing problems in meeting their rental obligations not to delay in taking decisive action.

She continues: "Companies of any size, from independent traders to chain stores, who think they might be in this situation shouldn't hold back in seeking professional advice from a qualified insolvency practitioner, as there are often measures that can be taken to help address the situation.

"Landlords are usually pragmatic enough to realise that getting some of the money they're owed and having their premises occupied is better than getting none of it and having an empty store. Arrangements to delay or reduce the payments can often be reached, and the cash flow situation could also be helped by reaching new agreements with customers and suppliers."

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