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Riots could cause cash flow problems for retailers

by LLB Editor
28th Sep 11 2:27 pm

Some London retailers could experience cash flow problems due to the riots as they prepare for the “quarter day” rental payments, the president of an insolvency trade body has warned.

A number of retailers are due to pay three months rent in advance to their landlords on September 29, but those who are already struggling may be hit further by the civil unrest in London in August.

R3 president Frances Coulson said the cost of refitting stores could make life difficult for retailers in the capital.

Coulson said: “I think [London retailers] will certainly be affected by the riots. Even if compensation does come in there are going to be cashflow issues – and cash is king – especially if you couple it with rent day.”

The insolvency trade body’s president said shops in cities such as London were struggling as consumers took a cautious approach to spending.

“Lots of city centre rents are high, but at least in cities like London they get the footfall,” said Coulson. “City centre businesses overall tend to encounter a lack of spending on the high street because consumers are reining in their spending because of worries about job security.

“Some bigger retailers may be dependent on sales with the new season’s stock coming in. It’s a very difficult market and it will be for some time to come,” she said.

A number of high street retailers went into administration on the last quarter day payments deadline in June. Homewares specialist Habitat, department store chain TJ Hughes and fashion retailer Jane Norman were all forced to call in the administrators.

Banks may choose to be lenient and extend credit to retailers around this rent day so they can carry on trading over the Christmas period, it is understood. But this goodwill could run out on the next quarter day in December after retailers have made the most of Christmas sales.

Coulson said: “Last time round, rent day identified many businesses that had survived the recession but did not have funds to meet their rental obligations.

“Over the preceding three months we have seen little improvement in retail sales, economic growth or consumers increasing their expenditure. For that reason we are likely to see further retail casualties.”

Retailers such as Sir Philip Green, the head of Bhs and TopShop, have called for landlords to allow stores to spread rental payments over the course of the year.

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