Close as shoppers turn to the internet, will 2019 be... GASP OF HIGH STREET? Loan victims’ payout shock
tens of thousands of jobs and seen major chains including House of Fraser, Evans Cycles, Maplin and Poundworld collapse into administration in the past 12 months.
Others, including New Look, Carpetright, Mothercare and Homebase, have been forced to seek legal agreements with their landlords to shut stores and slash rent bills.
Last week, HMV said it was calling in administrators for the second time in six years, putting 2,200 jobs under threat.
Paul McGowan, executive chairman of HMV and restructuring company Hilco, said: “Business rates alone represent an annual cost to HMV in excess of £15million. Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months.”
Will Wright, of administrators KPMG, said: “Over the coming weeks, we will endeavour to continue to operate all [HMV] stores as a going concern while we assess options for the business, including a possible sale.
“Gift cards will be honoured as usual, while the business continues to trade.”
Experts say no high street retailer is safe from closure. Retail analyst Richard Hyman said last night: “I think we have a toxic combination spending. High streets are the heart of communities but it will take a coordinated effort from local people and businesses to save them. For a start, the Government can scrap business rates, which are taking place at the moment, made up of a number of key factors.
“We’ve got a consumer economy that is not in as good a state as we have been led to believe. Consumers have been spending money they have not really got, so credit exposure is really high and indebtedness is at worrying levels.
“At the same time, we have seen years and years of internet growth while shops haven’t shut correspondingly – most of the £65billion we spend on the internet we would have spent on shops.
“You don’t have to be a business genius to work out that the cost of running shops has not gone down, so after the last 15 years of the internet, it has successfully cannibalised business from traditional shops.”
He added: “On top of that we have Brexit which has led to further uncertainty.
“Overall, in terms of the number of shops, there are too many mouths to feed. They are fighting over an ever smaller piece of the pie.”
Mr Hyman said that as retail was the biggest UK employer after the public sector, it was “inconceivable” that it would not survive.
But he warned that the industry was on the “back foot”, saying: “It is becoming a tougher and less profitable environment.
“They are on the for sure.” back foot DEBT campaigners have warned that more payday lenders could follow Wonga and go bust in 2019 – leaving thousands of customers owed millions in unpaid compensation payments, writes Dominik Lemanski.
Financial Conduct Authority figures show new affordability complaints made against “payday or instalment loan” firms are expected to soar by
167 per cent in the next 12 months to 50,000 – up from 18,378 in 2017/18.
Lenders can be ordered to pay compensation if borrowers can prove they were missold loans because they could not afford repayents.
It comes four months after Wonga collapsed into administration under a barrage of compensation claims and rival Cash Genie announced it could not afford to pay £20million to victims.
Wonga went into administration, with an estimated 200,000 customers owing £400million in loans, after being hit by compensation claims that cost it £550 each to process. The jump in
‘People must access affordable credit’
affordability claims follows a Financial Ombudsman decision to change the six-year time limit on when these can be considered.
Thousands of older claims are now being looked at.
Debt campaigners and MPs warn that if more firms hit the wall in the next 12 months, thousands of customers could miss out on compensation payments.
They also fear former customers could be chased by creditors for outstanding debts – while still being owed payouts by the same firms.
Stella Creasy, Labour MP said: “Many of those who took out loans continue to owe money to these companies because they were mis-sold them in the first place.
“There’s a real risk they will be chased to repay money to go to creditors, yet not be compensated themselves... Government ministers must step in.”
Richard Lane, Director of External Affairs at StepChange Debt Charity, said: “A huge number of clients in problem debt are still coming to us with payday loans. 18 per cent of all new clients – and 29 per cent of those clients under 25 – had one.
“It remains vital that people have access to affordable credit when they need it most and we welcome the Financial Conduct Authority’s steps to address consumer detriment in the high-cost credit market.”
The FCA declined to comment but guidance sent to lenders in a letter in October, informs them that they must notify the FCA immediately” if they know they will be plunged into financial difficulties due to compensation claims from clients.