Rent deadline threatens retailers
The high street is bracing itself for a wave of retail collapses this week as a huge rent deadline looms.
Wednesday will be one of four so-called “quarter days” where rents have to be paid three months in advance, a system seen by many retailers as archaic.
Richard Fleming UK head of restructuring at the KPMG, said: “The March rent quarter date may be the nail in the coffin for retailers who have not traded well over the past few months.
“Creditors effectively have to decide now whether to support businesses now through to the end of the year."
High profile retail magnates including Topshop boss Sir Phillip Green have been lobbying the government for a change to the system, but until it is overhauled this rent deadline could spell the end for many business who are already teetering on the brink due to recessionary pressures.
Many retailers are currently in the process of negotiating with landlords a switch to monthly rent payments to bolster cash flow. Other solutions include disposing of empty or underperforming stores, through company voluntary arrangements (CVAs).
Rarely seen until the recession, CVAs have become more common as businesses face the threat of failure. They allow companies under threat of administration to renegotiate debts with unsecured creditors but some landlords regard them as a tool to escape individual lease liabilities.Posted at 07:54PM Mar 22, 2010 by Kelly Board in The Economy | Comments[0]
UK Recovery to be 'Sluggish'
Economists are predicting that the recovery in the UK economy this year will be ‘sluggish.’
The recovery is expected to be subdued until at least the middle of next, whilst it will grow around 1% this year, according to industry body CBI.
Furthermore, economists at the Ernst and Young ITEM Club have criticised the government’s forecasts for the economy, branding them too optimistic. The government is forecasting a growth of 1.25% this year, progressing onto 3.5% in 2011.
These forecasts may be revised however by Chancellor, Alistair Darling, in this week’s budget.
"[The chancellor's] projections for future years are too bullish - based on a strong pick-up in consumer spending that is unlikely to materialise," said Peter Spencer, chief economic adviser to the ITEM Club.
Meanwhile, CBI have said that they expect the economy to grow by 2.5% next year.
"The economic outlook is improving, but the lack of a clear drivers for growth will make for a bumpy ride in the months ahead," commented Richard Lambert, director general of the CBI.
"[We expect] the recovery in 2010 to be slow and sluggish, with few signs of real strength until well into next year."
Both of these groups have now called for more detail to be given in coming years regarding the government’s plans to cut the deficit in the budget.
In order to fill the deficit, the borrowing required is expected to be less than the originally predicted £178bn, the figure that Darling set down in last year’s pre-Budget report.
According to the ITEM club, Darling has the capacity to make a total of £25bn in cuts over the next five years in order to tackle the budget deficit without impacting upon the UK’s economic prospects.
The CBI called for a "credible plan" to balance the budget by 2016 in order to reassure international investors.
On Sunday the chancellor repeated his warning that there would be "no giveaways" in Wednesday's budget.
"The mood of the times is not for giveaways," he told the BBC.
"People are not daft, they know perfectly well that we need to get borrowing down and secure [economic] recovery."
Posted at 04:10PM Mar 22, 2010 by Marc Stenton in The Economy | Comments[0]
