There’s little doubt that 2018 has been one of the most challenging years on record for the retail sector, with a near record string of insolvencies, company voluntary arrangements, and administrations.

The changing face of the retail landscape, principally as consumer behaviour shifts to online purchasing, is affecting our high streets like no other time in modern history.

If you’re a retailer concerned about insolvency, this article is intended to act as a guide and support. Do give one of our insolvency professionals a call at any time, or use the live chat below, if you’d like to have a no strings attached conversation about your situation. A key factor in surviving insolvency is to act early once the signs of business distress are felt.

Retail Insolvency

Common Issues Forcing Retailers into insolvency

  • Sterling’s weakness and rising inflation are putting pressure on retailers to discount prices continually to stay competitive and encourage reluctant consumers to spend.
  • Retailers with stores located on the high street and out of town, frequently have large property portfolios and hefty rent bills to match. Rent is typically payable quarterly in advance, leaving struggling retailers with tough decisions to make as to whether the company is in a position to pay the rent and its trading prospects for the following quarter.
  • Supermarkets have made it tough for independent stores to survive as consumers opt for the convenience of one-stop shopping, rather than to support small, local businesses in their community.
  • Some businesses are opening for longer hours to provide more flexibility for consumers. However, this can overstretch finances and cause them to collapse into insolvency.
  • Having to comply with auto-enrolment and minimum wage increases when working capital is already stretched.
  • Inclement weather also drives customers to out-of-town shopping centres with free parking facilities or to shop from the comfort of their own armchairs.
  • Developing online retail requires major investment, including secure payment systems to control fraud and prevent losses.

With these factors in mind, the potential for more casualties on the high street is significant and struggling retailers will face a number of formal insolvency procedures.

Formal Insolvency Solutions Appropriate for the Retail Sector

Numerous retailers have turned to formal insolvency procedures as a way of trimming lease portfolios and restructuring their businesses. Company Voluntary Arrangements (CVAs) and Pre-Pack Administrations are regularly used to reshape retail businesses, specifically when the underlying business is thought to be sound. Here is a brief explanation of the various procedures and how they might help.

Company Voluntary Arrangement

the CVA process allow directors to retain control of the business by helping them to trade out of their financial difficulties. It is the most appropriate route for companies that are struggling to keep their creditors at bay, but have a viable business. This type of insolvency tool has to be approved by the majority of creditors, that is, greater than 75% of those voting. The deal with the creditors typically involves repayment of an agreed percentage of its debts over a fixed period of time, frequently through monthly or quarterly contributions.

Pre-pack administrations

are well suited to the retail sector as they are useful tools where brands and key staff are crucial to the business and speed is essential to keep the business going. Put simply, more jobs are likely to be saved via a pre-pack sale. The alternative to this formal procedure is the closure of the business and the liquidation of the business assets, which is likely to produce a poor return for creditors.


While administration can be used as a restructuring mechanism intended to return the company to profitability, it is more likely to be used in the retail sector as a way to keep the business running while the profitable parts of the business can be sold.

Alternative Finance for Retail

Certain forms of alternative finance can be appropriate for the retail industry. Merchant cash advances,for example, are an alternative finance solution in which historical payments moving through your card terminal are used to secure lending. For a business without assets but who can demonstrate a healthy turnover, this can be a useful way to secure finance. Repayments are set as a proportion of your ongoing revenue.

Are you a Retailer in Trouble? Seek Professional Insolvency Help

As a director of a business operating within the retail sector, it’s crucial to seek professional advice at the first sign of financial distress as this will give you more options and the best chance of survival. For free and confidential advice from one of our professional advisers, please call 0800 074 6757 or email