The survival rate for UK high street retailers that have fallen into administration has dropped to 55 per cent for the first nine months of 2012, compared to 66 per cent in 2011.
According to the most recent figures from FRP Advisory's retail administration survival index, from January to September, 29 significant UK high street brand names have entered administration processes involving around 4,900 individual stores. Just under 2,700 of those outlets have so far been saved through a pre-pack business sale out of administration. However, more than 2,200 of those stores have since been closed, either as part of the administration or through a pre-pack sale.
From these figures, the statistical average survival rate has been set at 55 per cent once the parent high street chain has entered administration. The store survival rate has decreased when compared to last year's figures, when 66 per cent of stores continued to trade post administration.
Of the 29 chains that failed, around 60,200 employees were involved, 35,900 of which held on to their jobs post-administration – generating a statistical survival rate of 59 per cent. The job survival rate has decreased compared to last year's figures, where 67 per cent of staff held onto their jobs post-administration.
Glynn Mummery, a partner at FRP Advisory, highlights the difficult negotiations between landlords and retailers during the third and fourth quarter of this year. “Store rental costs are one of the largest fixed overheads for retailers who are continuing to battle against the tough headwinds of a consumer spending climate that has further depressed even since last winter. With margins paper thin at the best of times, retailers are also increasingly battling with rising input costs such as the price of cotton, which is already pushing through to recent trading, recent rises in the cost of fuel, while there is little wriggle room to push on staffing costs, particularly on the shop floor.”
Several turnaround investors have been active in buying up struggling retail chains over the last two years, picking up slimmed-down versions of the chains. Notable deals include OpCapita's acquistion of Game, GA Europe's purchase of Shoon and Primary Capital's rescue of Hawkin's Bazaar.