Retail sector ends decade with fall in the number of CVAs whilst administrations increase 57% in December has been saved
Retail sector ends decade with fall in the number of CVAs whilst administrations increase 57% in December
8 January 2020
- Deloitte analysis reveals a total of 124 UK retail administrations in 2019 of which, 28 (23%) were large retailers employing c.51,000 UK employees, compared to 26 (21%) and c.23,500 employees in 2018;
- December 2019 saw a 57% increase in retail administrations compared to December 2018; and,
- UK retail sector saw 24% decrease in CVAs in 2019 year-on-year, and a 38% decrease in the number of large retailers choosing CVAs as a restructuring method.
The number of UK retailers entering administration in 2019 was 124 compared to 125 in 2018, a marginal decrease of 1%, according to Deloitte’s latest insolvency figures. This came despite December seeing a significant year-on-year increase in retail administrations with 11 taking place in December 2019, compared to seven in 2018 – a 57% surge.
Deloitte's research also found that large multi-site retail administration appointments increased from 26 the previous year to 28 in 2019. In addition, the total number of employees of large retailers entering administration more than doubled year-on-year, rising from 23,691 in 2018 to 50,586 employees in 2019.
Dan Butters, partner and head of restructuring services at Deloitte, said: “2019 has proven to be another challenging year for retailers. Whilst the number of retail administrations has remained broadly flat on 2018, we have seen an increase in the number of large retailers entering into administration this year. December’s increase is most likely a reflection of increased complexity associated with the implementation of CVAs and further pressure on the high street as a consequence of structural change.
“We have seen consumer confidence and footfall continue to drop in 2019, which has been further exacerbated by narrowing margins from high levels of discounting – driven by a highly competitive pricing environment. However, entering a new decade brings fresh opportunities for retailers, particularly with a review of business rates as announced in the Queen’s speech in December. With this in mind, 2020 may see improvement in the retail environment for a number of retailers.”
Deloitte’s research shows the number of retailers entering into Company Voluntary Arrangements (CVAs) decreased by 24% from 38 in 2018 to 29 in 2019.
Following a seven-fold increase in 2018, the number of large multi-site retailers entering into a CVA last year decreased from 13 to 8 in 2019.
Butters continued: “Whilst the squeeze in margins has continued to result in retailers operating a large number of loss-making stores, 2019 has seen a decrease in CVA activity, particularly towards the end of the year, which in turn resulted in an increase in the number of administrations. This is in part due to push back from the landlord community which has made CVAs harder and less attractive to implement. We believe that this increase in administrations in December 2019 may be a sign of things to come in 2020 as retailers are left with fewer options to restructure their business.”
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