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The future continues to look bleak for High Street retailers


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July 13, 2018     |     Posted by:     |     Category: Blog, Company Voluntary Arrangements

If the first half of year is anything to go by, we’re likely to see more High Street names hit the headlines announcing store closures and job losses. 2018 seems to be the year that popular businesses have had to finally address their financial problems head on.

Over the last few months, big names like Marks & Spencer, House of Fraser and Mothercare have all announced store closures as part of CVA discussions with their creditors. These store closures and job losses are necessary to avoid a fate similar to that of Toys R Us, Maplin and Poundworld, who fell into administration this year.

In total, 687 stores and 14,714 jobs will be lost from High Street retailers this year.

 

Why is this happening to High Street retailers?

We took a closer look at Poundworld in an earlier blog, and how the discount retailer went from being worth £150m when sold in 2015, to racking up significant financial losses in the years since.  Poundworld administration – what happened?

 

How High Street retailers are fighting back

The New West End Company, who represent the High Street Retailers in London’s premier shopping area, are calling for an additional tax to be added to ‘largely’ online retailers. The money raised, from what is being deemed the ‘Amazon tax’, could essentially subsidise business rates for traditional retailers.

Applying an additional 1% sales tax to online retailers, through VAT, is estimated to raise £5bn annually. This could fund a 17.5% cut on business rates, which is one of the major costs retailers cannot avoid.

Although outlining the process above appears fairly simple, in practice it isn’t.

Firstly, defining the term ‘largely’ online business has its own challenges. Most businesses these days have an online store, so agreeing where the line is drawn could be difficult. And then this gives a marker for all to aim for – for example it’s rumoured that Amazon could be buying supermarket chain Morrisons. If that were to happen, would Amazon continue to be classified as a ‘largely’ online retailer?

Secondly, this approach wouldn’t necessarily change consumer buying behaviour. In a cash-rich, time poor society, online shopping is what they demand and where they will spend their money. Equally the proposed solution from The New West End Company wouldn’t impact the local High Street near you (unless you shopped in Regent Street, Oxford Street and Bond Street!)

 

Is a Company Voluntary Agreement right for my business?

If you’ve been considering ways to restructure your debts to get your business back on track, a CVA is just one way to this. There are other options as well. It’s best to speak with a professional adviser about your specific situation and to evaluate the options availabel to you.

Talk to one of our team today on 0808 1644 222, or contact us here and we’ll get in touch.


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