A higher percentage of jobs than stores are being saved, according to a study of major UK retail insolvencies.
Findings from insolvency trade body R3 finds that while an average of only 48 per cent of shops are saved when the surveyed retail chain entered administration; some 53 per cent of jobs were kept.
R3’s analysis, which has looked at high-profile administration processes such as Clinton Cards and GAME over the past 18 months, finds that sale processes are managing to keep staffing levels in line with store levels.
The last year and a half has seen problems arise at well known retailers such as Jane Norman, which was ultimately acquired by The Edinburgh Woollen Mill in January 2011, and the Blacks/Millets outdoor clothing chain which saw JD Group beat Dragons’ Den panelist Peter Jones to the deal.
However, the results came at the same time as the latest Business Insolvency Index from Experian, which finds that every UK region besides the North East, East Midlands and Eastern posted a decrease in the number of business insolvencies in July.
R3’s statistics show that the biggest proportionate fall was experienced by Habitat, which saw its shop count fall from 33 to 3, and its staff count from 750 to 150 (see table below).
Clinton Cards recorded the most store closures when its administration process saw 384 of its 784 locations shut the doors.
|Pre-insolvency stores||Pre-insolvency staff||Post-insolvency stores||Post-insolvency staff|
Lee Manning, president of R3, says that while an insolvency process is never good news, it can result in ‘significant’ parts of the business surviving.
He adds, ‘The fact that over 50 per cent of jobs remain intact is positive given the trouble a business is likely to be in at the start of insolvency – by definition unable to pay debts as they fall due.
‘Much of the retail sector needs to change its methods of meeting customer expectations or face extinction. Store portfolios are simply too large at present, so shedding some unprofitable stores is part of this evolution.’
Figures from accountancy firm Deloitte recommend a downsizing of between 30-40 per cent over the next 3-5 years.