Wednesday 08 January 2020 12:33 pm

Retail CVAs decline as landlords push back against plans

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The number of retailers using company voluntary arrangements (CVAs) to rescue their businesses slumped last year due to backlash from landlords, as administrations spiked in December.

The use of CVAs declined 24 per cent from 38 in 2018 to 29 in 2019 as landlords increasingly push back against rent cut requests by struggling retailers.

The controversial restructuring agreement – which allows businesses to seek rent cuts and shutter stores – soared among large retailers between 2017 and 2018, rising from two to 13 within the space of the year.

However last year the number of large retailers opting to launch CVAs dropped down to eight, according to the latest research by Deloitte.

Landlords have become increasingly vocal about their opposition to some CVA plans, with some launching legal action against retailers.

Debenhams won a High Court battle with property owners last year, allowing the department store to proceed with its restructuring plans.

Meanwhile, retail administrations spiked last month, increasing 57 per cent from seven in December 2018 to 11 in 2019.

Large multi-site retail administration appointments increased from 26 in 2018 to 28 last year, and the total number of employees at those retailers more than doubled from 23,691 to 50,586.

High profile collapses included Mothercare, Links of London and Karen Millen.

However, the total number of UK retailers that entered administration last year was 124, one fewer than was recorded in 2018.

Dan Butters, partner and head of restructuring services at Deloitte, said: “Whilst the squeeze in margins has continued to result in retailers operating a large number of loss-making stores, 2019 has seen a decrease in CVA activity, particularly towards the end of the year, which in turn resulted in an increase in the number of administrations.

“This is in part due to push back from the landlord community which has made CVAs harder and less attractive to implement.

“We believe that this increase in administrations in December 2019 may be a sign of things to come in 2020 as retailers are left with fewer options to restructure their business.”