Landlords move to bail out UK retailers from bankruptcy

With the retail industry buckling under the impact of the global financial crisis, major landlords of retailers in the UK have stepped in to help by coming up with a 10-point plan to cut high property costs to prevent more retailers falling into administration.

The landlords plan ways to focus on 10 areas of expenditure such as waste management and security at their centres, which can reduce the retailers costs in the form of lower charges.

This unique 10-point plan to cut high property costs came from the British Property Federation after a pilot was implemented at four shopping centres in the UK, focusing on cleaning, waste management, security, administration, maintenance, utilities, customer service and marketing, which resulted in savings between 10 per cent and 20 per cent for the retailers.

In the past, retailers were finding it difficult to pay their quarterly rent due to the slowdown in the retail sector, but with the implementation of the new plan, landlords are more amenable to talk about accepting monthly rents, a term refused by them earlier.

As the UK economy went into a tailspin, some retailers had even refused to pay service charges to their landlords.

The move is expected to reduce the number of retailers falling into administration as the credit crunch and low consumer spending has already claimed many high-profile UK retail chains like the century-old, 815-strong retail giant Woolworths and Zavvi out of business recently. (See: Collapsed retailer Woolies' stores to be sold off by Christmas  /  Britain's largest music and entertainment chain Zavvi Group shuts 22 stores)

The 122-year-old tea and coffee specialist, Whittard collapsed and went into administration but was acquired by Epic Private Equity from the administrators for an undisclosed sum. (See: Sapat eyes UK tea and coffee retailer Whittard)

Retail analyst firm Experian and insolvency firms say, more than1,600 retailers in the UK will be forced to shut shop as consumers shun shopping due to high unemployment, recession and the down swing in house prices. (See: Hundreds of UK retailers to go bust in 2009)

Under huge pressure to increase their sales during the festive Christmas shopping season, nearly 82 per cent of retailers induced shoppers with discounts as high as 40 per cent, normally offered after the festive season to clear unsold stocks.

Experian said that by end December, nearly 1,137 non-food retailers closed shop, which was 21.2 per cent more compared to the year before and predicted that 440 more would go bankrupt in the next four months with a high of nearly 1,400 going bust in 2009.

Since in the recent past a few major retailers like MFI, SCS, Dolcis, MK One, Rosebys have gone bus, nearly 194 food retailers closed business last year, which is up by 10.9 per cent while 230 may be forced to shut shop this year, Experian said.

All landlords understand that with a tenant going into administration also spells losses for them and high charges are one of the main contributing factors to crippling the retail industry in the UK.