A severe jobs chill descends on two more failed UK retailers

Never mind the climactic Beast from the East, in retail yesterday it was a case of two more well-known retailers going west. Toys R Us and electronics firm Maplin both collapsed into administration, with a total of 5,700 jobs being put at risk.

Both retailers were known to be in difficulties, but last-ditch rescue attempts foundered and orderly wind-downs are all that is left. Toys R Us was the textbook case of a former bricks-and-mortar, edge-of-town retail powerhouse brought low by online rivals. Maplin struggled to temper the impact of sterling’s weakening since the Brexit vote in 2016 as it gets a lot of its electronic product from abroad.

In addition, Toys R Us and Maplin could not be immune from weak consumer spending as customers reined in the fantastic plastic amid an extended period of low earnings growth and stubbornly high inflation. The withdrawal of credit insurance at a Maplin on the ropes was also a critical factor in its collapse, while Toys R Us had a £15 million tax bill to contend with as well. Their respective stories show how frequently business failure is a combination of generic negative factors in a sector exacerbated by company-specific challenges.

A business may have a sporting chance of battling its way out from under one of those two challenges, but it is far more difficult when you are ensnared by both. Insolvency, without enough capital to meet your financial commitments, is then what faces struggling businesses.

Weir’s way looks clear

Scottish engineering group Weir tends to mirror the fortunes of its customers in those economic swing sectors, energy and minerals. As such, it is something of a proxy for the health of the macro global economy, with cyclicality hardwired into its valves and pumps.

Therefore, the sanguine independent forecasts for global demand in 2018 are just what Weir wants to hear, with total orders at the group up 20 per cent in 2017.

Standouts were North American upstream, orders up 82 per cent, general oil and gas up two-thirds, and minerals ahead 11 per cent. Chief executive Jon Stanton believes there is more to come, with even the worst past for the Flow Controls business, where new business has been letting down the aftermarket.