10 news Retail in constant state
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of flux In mid 2012, The Bank of England and HM Treasury launched the Funding for Lending Scheme (FLS) to boost lending to the real economy
The idea behind the scheme was that the banks and building societies that increased lending to UK households and businesses would be able to borrow more in the FLS, and do so at lower cost than those that scale back lending.
Banks have cut the amount they lend to retailers by another 5.7% in the past year (to December 31), reducing outstanding loans to the sector from £16.47 billion to £15.53b. Lending to all businesses in the UK fell by only 0.1% in the same period.
The value of loans outstanding to retailers has now fallen 18.7%, or £3.58b, over the past three years, from £19.12b at the end of 2009. The past six months has seen a rise in the number of high-profile retailers such as Comet, HMV, Jessops, Blockbuster and Republic being forced into administration.
Kevin Walmsley, managing partner of the Wilkins Kennedy Egham and Heathrow office, says: “ Due to problems in the retail trade, banks appear to have been reducing their exposure to the retail sector far faster than they have to other parts of the economy. The recent retail sector insolvencies will have added to the view amongst banks that they are still over-exposed to this struggling sector. The banks have been very patient with the sector but it is likely that patience is wearing thin.”
Walmsley adds: “Retailers are having to deal with a shrinkage in consumer spending, stubbornly high property overheads, high parking and transport costs, hypermarkets selling everything in one place and greatly increasing competition from the internet.”
Wilkins Kennedy adds that more retailers are turning to their landlords and asking them to step in and help by reducing rent burdens or giving more time to pay.
THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2013
Kevin Walmsley
Keith Stevens, restructuring and recovery partner at Wilkins Kennedy, added: “If a retailer disappears from the high street, the landlord is left with an empty unit and no rent. In the current economic climate, units can stay vacant for a long time so it is in the interest of landlords to help as the landlords themselves can face business rates bills on the empty properties together with the costs of having to secure the property.
“So far, the issue of excess property rents has been dealt with by lengthy and complex negotiations over CVAs or short-term rent holidays. Retailers would rather see landlords take a quicker and more pragmatic response to the issue of property overheads.”
It is difficult to imagine the situation improving for many retailers in the foreseeable future. The decline of the high street and move towards the hypermarkets looks set to continue at a pace. Specialist retailers may only be found on the internet in the future.
Details:
Kevin Walmsley Egham and Heathrow
kevin.walmsley@wilkinskennedy.com
Keith Stevens
keith.stevens@
wilkinskennedy.com
Wilkins Kennedy LLP:
Egham: 01784-435561 Reading: 0118 -9512131 Amersham: 01494-545570 Guildford: 01483-306318
www.wilkinskennedy.com
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