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Insolvency in the wholesale and retail trade: a guide for companies in financial difficulty

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Insolvency in the wholesale and retail trade: a guide for companies in financial difficulty

Reviewed: 10th October 2016

In 2015, the wholesale and retail industry suffered the second highest number of insolvencies in the UK, according to figures from the Insolvency Service. A similar trend has continued into 2016, and with only the construction industry experiencing more insolvency events, it is a worrying time for owners of wholesale and retail businesses.

High street retailers are facing increased business rates following the recent 2017 revaluation, and with higher rentals and greater competition from the ever-developing online sector, the potential for further decline is significant.

What are some of the problems experienced in the wholesale and retail trade?

  • The pressure to adopt longer opening hours and provide more flexibility for customers is causing some businesses to overstretch their finances, and decline into insolvency.
  • Large supermarket retailers have made it difficult for independent stores to survive, as consumers choose the convenience of one-stop shopping over support of local small businesses.
  • Retailers with multiple sites are facing huge rental and business rate bills, as well as having to comply with auto-enrolment and minimum wage increases at a time when working capital is already limited.
  • High street retailers also fall prey to the effects of inclement weather which can drive customers to out-of-town shopping centres with integral parking facilities, or alternatively to shop from the comfort of their own home.
  • Those who choose to develop online retail channels must invest in secure payment systems to control the risk of fraud, and potentially heavy losses.

So is there anything you can do to mitigate the risks of insolvency for your own business?

Seek professional help

By obtaining expert guidance, you’ll be aware of the best types of funding for your business and understand the options should your situation decline further, being able to prepare for the worst and act quickly if necessary.

A licensed insolvency practitioner (IP) can tailor their advice to your business, using experience and knowledge of the industry.

Consider alternative forms of finance

If your bank is unwilling to lend, or alternative options just seem a better fit for your business, you could be eligible for previously unconsidered sources of funding. Merchant cash advances, for example, can provide an ongoing supply of working capital based on the value of your debit and credit card sales.

Informal negotiations with creditors

Creditors may be open to reducing repayment amounts, and allow you to pay over a longer period of time. If your business owes money to HMRC, it is vital they are contacted as soon as you know that a payment will be missed.

You may be able to agree a formal Time to Pay arrangement, or use the skill and experience of an insolvency practitioner to negotiate on your behalf. The input and negotiating skills of an expert carries weight with HMRC, and the fact that you have sought professional advice demonstrates your determination to repay what is owed.

Formal insolvency solutions

There are a range of formal routes into insolvency, which although not an ideal situation, could help your business out of financial trouble in the longer-term.

  • Depending on your circumstances, a pre pack administration could be appropriate if the underlying business is thought to be viable.
  • Company Voluntary Arrangements (CVAs) allow you to retain control of your business, and potentially help you to trade your way out of financial difficulty following formal renegotiation of repayments with creditors.

At Real Business Rescue, we focus on business turnaround and recovery by providing advice tailored to each client. The wholesale and retail trade has been a volatile industry in recent years, and a post-Brexit economy will bring more challenges to business owners in terms of staffing and legislative changes.

Call one of the team to discuss your situation in complete confidence, and find out more about how we can help. Real Business Rescue provide director advice online, over the phone, or in-person at one of our 72 UK offices or a place of your convenience.

Who we help

  • Company Directors
  • Finance Directors
  • Sole Traders
  • Accountants
  • Small Businesses
  • Large Businesses
  • Partnerships

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Andrew MacKenzie
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