The imminent rental quarter day on March 25th will no doubt be the trigger for more retail casualties, after 2012’s high profile Q1 administrations of Peacocks, Bonmarche, Blacks and most recently Fenn Wright and Manson, amongst others.

The imminent rental quarter day on March 25th will no doubt be the trigger for more retail casualties, after 2012’s high profile Q1 administrations of Peacocks, Bonmarche, Blacks and most recently Fenn Wright and Manson, amongst others.

We estimate that this ongoing process of insolvencies will contribute to a reduction in non-food retail capacity of at least 15% over the next 3 - 5 years – being disproportionately higher in sectors facing structural decline such as entertainment or electricals, and certain discretionary segments such as clothing. 

In short, we’re facing a once in a generation clean-up of UK retail as the sector adapts to the structural threat to physical space from the internet, grocers expanding aggressively in non-food, consumer confidence bumping along the bottom of the trough, and deepening cost pressures from higher sourcing costs, energy prices and business rates.

What we mustn’t lose sight of though is that by definition restructurings result in smaller businesses with recapitalised financial structures capable of reviving the business as it goes forward. This has certainly been our experience of situations where GA Europe has been the principal restructuring protagonist, such as Speciality Retail Group, British Bookshops & Stationers and TJ Hughes.

And it’s not all bad news: recent figures from FRP Advisory suggested that almost 70% of the 39,000 staff at the larger retailers falling into administration in 2011 retained their jobs after the companies emerged from administration. And even where significant numbers of shops are scheduled to close, as at Peacocks, sensible renegotiations with landlords can restore the viability of some outlets within a restructured and refinanced core business.

Over the next couple of years, there will be more restructuring of businesses with a decent underlying proposition and a realistic pitch to customers – but carrying the legacy of overlarge store portfolios and unsustainable levels of debt. These are exactly the types of business in which restructuring specialists are looking to invest. The changes needed are not just financial: putting a retail business back on a sound footing almost always requires hands-on expertise to carry out the hard operational restructuring, as well as an injection of new capital. 

  • Gavin George is managing director of GA Europe

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