High street braced for 'bloodbath' as Borders succumbs

Published on Thursday 26 November 2009 20:54

RETAILERS should prepare for a New Year "bloodbath" in a repeat of last year's clearout of the high street, insolvency practitioners yesterday warned.

A further 23 household names are expected to shut up shop in the first months of 2010, adding to the 22 that became insolvent in the first part of this year.

While not naming stores that could suffer the same fate as Woolworths and Zaavi, trade body R3 cautioned that 90 per cent of retailers deliberately delay starting insolvency proceedings until the New Year, hoping they will recoup the money over the festive period.

The warning came as Borders bookshops fell into administration, while the CBI's latest distributive trends survey showed that retail sales grew at their fastest pace in two years.

Retailers are expecting growth to pick up further in the run-up to Christmas, but have warned that New Year was more uncertain, with VAT due to due rise on 1 January and worries over consumer confidence.

R3 president Peter Sargent said: "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, insolvency peaks after a recession ends.

"The recent case of creditors agreeing a company voluntary agreement in the case of Blacks Leisure shows there are rescue procedures available to stave off liquidation."

R3 highlighted the number of retailers – including Land of Leather, Barratt Shoes and Waterford Wedgewood – that became insolvent in the first quarter of 2009, with 88 per cent of the trade body's members predicting that the expected decrease in consumer spending will push many retailers over the edge early in the new year.

CBI Scotland assistant director David Lonsdale said: "Measures designed to tempt Scots back to the high street, such as the temporary VAT reduction and the car scrappage scheme, do appear to be providing a timely fillip to the retail sector in the run up to the crucial Christmas period.

"A question remains, however, over just how sustainable that pick-up in demand will be once these incentives are removed in the new year, and with Scottish unemployment expected to continue to rise further."

Andy Clarke, chief operating officer of Asda and chairman of the CBI distributive trades panel, added that retailers were beginning to target customers ahead of the VAT increase, encouraging them to make big purchases before the tax goes back up.

The CBI's latest survey echoed findings this month by accountancy firm BDO, which monitors sales at 10,000 stores. It predicted retailers would enjoy a "stronger" Christmas, but an "ugly" New Year as unemployment bites.