Yesterday was rent quarter day for a lot of businesses, a very testing time and an unfortunate indicator to the success or failure of a lot of small companies. With rent, VAT and staff wage worries, a lot of businesses could be forced into administration before the year is out.
Usually businesses will pay 3 month’s rent up front for the next quarter on their commercial properties but the current financial climate means that they are having to make significant changes in order to meet the payments.
Leading insolvency trade body, R3 President, Lee Manning comments:
“Quarter day will always present a challenge to struggling retailers. Some of their leases were agreed during the good times and will have many years to run at very high rents. Negotiating with landlords is key to staving off insolvency, although of course Directors must take care to avoid wrongful trading with regard to all of their creditors. More businesses are attempting to pay rent on a monthly basis or even negotiating turnover linked rents to help them manage their cash flow more effectively. This is more likely to apply to newer leases however.”
The rise in internet sales along with a poor trading climate has seen some 21,000 job losses on the high street since the start of the year due to business insolvency including big names such as Clinton Cards, Game and Peacocks.
Although retail sales were up in May by 1.4%, a poor April due to wet weather and reduced fuel sales in the wake of panic buying from the threatened tanker driver’s strike; has damaged a lot of companies.
Research by R3, using the Bureau van Dijk Fame database; has shown that 26% of UK businesses are in the ‘caution’ or ‘high risk’ band when it comes to companies that are likely to fail in the next 12 months.
This research yet again brings to light the need to seek professional advice before problems get out of hand. Administration and liquidation doesn’t always have to be the outcome for a struggling company if advice is sought at the first sign of trouble. Even getting advice before there is anything to worry about by having your businesses’ health checked over may bring to light ways to avoid any potential struggles in the future and preserve your trading strength.
Focus Insolvency Group are a firm of licensed insolvency professionals and can provide you with free impartial advice. Get in touch or leave a comment below.