High Streets Suffer from Rising Insolvencies

22nd May 2018.

The number of retailers entering insolvency has increased by 7 percent to more than 1,000 in the past year, a study shows.

It has been a difficult few months for high street retailers, consumer confidence and spending has been persistently low and retailers are struggling to boost profits. The high street has lost staple brands such as Toys R Us, Mothercare, Poundworld, and Maplin and many more are gasping for air. It is important that retailers keep a close eye on financial paperwork, and insolvency is not the inevitable option for a business when profits fall too low.

According to new data from the law firm, RPC, insolvencies on the high street have jumped from 999 to 1, 071, which highlights a rise in operating costs on the high streets. For brick and mortar stores, high business rates and rent have persistently been tugging at purse strings. Online retailers are easily becoming stiff competition as their flexibility appeals to those manic consumers who do not have the time to browse shop windows.

At the Credit Protection Association, we have noticed the distress that has been expressed by our members within the retail industry. As sales have diminished as have profits, and many business owners are relying on Company Voluntary Arrangements (CVA) or insolvency practitioners to keep their business afloat. However, there are alternatives, and CPA offers its members the credit management tools to boost their financial status, provide some financial stability and return them to the high street stronger than ever.

Research by RPC showed that sales at the UK’s top 20 e-commerce only retailers jumped by 23 percent last year to £8.4billion while footfall on the high street continued to slump.

Tim Moynihan of RPC said: “It is hard for retailers to shed expensive excess space as their lease agreements restrict that option.

“Increases in the minimum wage and a rising rates bill also make it very hard to cut overheads to make up for sales lost to the internet.”

Meanwhile, a fall in job applications from EU workers has eased but firms remain worried about hiring skilled staff after Brexit, says a report.

The manufacturers’ organisation EEF said almost a fifth of companies saw a drop in applications from European citizens in the past year.

While there is no denying the difficulties of trading on the high street, business owners must be aware of their options. When sales and profits fall, pursuing insolvency is neither the best or easiest route to follow.

At the Credit Protection Association, our credit management products have provided our members with the most important thing of all; an alternative. Company closure is not inevitable for every business suffering from low profits, and approaching third-party credit controllers or debt collection professionals can provide another line of defence. CPA’s credit checks, status reports and company directories arm our members with the tools to single out those late and bad payers that could build a high enough debt pile to bury its suppliers.

We fight to the tooth for our members, particularly those victims of the so-called retail apocalypse. We recently created a new department within our company dedicated to getting our members rightly compensated in accordance with the Late Payment of Commercial Debts (Interest) Act 1998, unlocking hidden cash and potential, and giving their business a more indefinite lifespan.

The moral of the story is suppliers should be assertive in handling late payers, and not allow themselves to become financially vulnerable because of mistakes committed by somebody else. At the Credit Protection Association, we are dedicated to not only keeping our members on the high street but keeping them in a stronger position than ever before.

 The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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