Number of retail CVAs increase seven-fold

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administration

The number of large retailers that launched CVAs in 2018 increased seven-fold compared to the previous year, as the challenging market took its toll on the UK retail sector.

According to research conducted by auditing firm Deloitte, the overall number of retailers that opted for CVAs as a restructuring method in 2018 rose by 53 per cent year-on-year.

Of that total, 13 multi-store retailers, New Look, Mothercare and Carpetright, used the insolvency process last year.

This compared to just two large retailers that launched CVAs in 2017.

Meanwhile, the the number of retail administrations increased for the second year in a row, from 118 that collapsed in 2017 to 125 by the end of last year – an increase of six per cent.

Of the retailers that fell into administration in 2018, Deloitte said 26 of them were large brands, compared to 17 in the year before.

Heritage music retailer HMV grabbed headlines when it fell into administration at the end of 2018, following the same fate as Coast, Poundworld, Maplin and Toys ‘R’ Us.

“2018 saw some high profile retail casualties and a continued deterioration in trading conditions for retailers in the final quarter of the year,” Deloitte partner Dan Butter said.

“The squeeze in margins has left many retailers burdened with loss-making stores.

“This is a key driver for the rise in the number of major retail CVAs in 2018, with retailers seeking to close stores to reduce their cost base.”

He added: “Consumer confidence fell in the third quarter of 2018, which, combined with inflation-driven pressure on disposable incomes, has contributed to 12 consecutive months of declining footfall.

“The rapid decline in the performance of the high street has driven bricks-and-mortar retailers to increase their levels of discounting to counter this.

“This comes as retailers continued to face increasing staff and property costs, and a weaker sterling.

“Online retailers, however, have fared better, accounting for a record 21.5 per cent of all UK retail sales in November.”

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