Posted: 04 May, 2018
Simon Underwood, TMA member and business recovery partner, at accountancy firm, Menzies LLP, said:
“Company voluntary arrangements (CVAs) enable companies facing financial difficulty to restructure their finances so they can continue trading by cutting costs and agreeing voluntary repayment schedules with creditors. However, with a long list of retailers applying for CVAs in recent months, store closures and the potential for increased business rates could send the UK High Street further into a downward spiral.
“Allowing a business to continue trading and its existing management to retain control during the negotiation process, CVAs are often viewed as a more attractive option than other methods of insolvency, such as pre-pack administrations. However, if all struggling retailers start taking this route, it could damage the entire High Street irrevocably. As well as perpetuating the ‘bricks-to-clicks’ phenomenon, causing more consumers to abandon the UK High Street, empty stores could result in local councils increasing business rates to make up for inevitable shortfalls in payments.
“The recent, high-profile collapse of Toys R Us emphasised that CVAs are not always successful in protecting businesses from entering into administration and total closure. In order to determine whether this strategy is right for them, retailers should ask themselves why they are experiencing financial difficulties. With well-known retail and casual dining brands struggling, the stark message to all businesses with an interest in the High Street is to have a robust plan. Many companies need to act now and consider renegotiating rents with landlords and cutting their costs at an early stage to avoid struggling to repay liabilities further down the line.”
MENZIES is a top 20 firm of accountants, finance and business, and private client advisors that operate out of a network of offices across Surrey, Hampshire and London, providing our clients with easy access and local knowledge. Described as the ‘best performing firm outside of the top 10’ by Accountancy Magazine, MENZIES has over 400 employees and an annual turnover of more than £40m.
An award-winning firm, Menzies won ‘National Firm of the Year’ at the 2016 British Accountancy Awards and ‘Best Tax Team’ at the 2017 Tolley Taxation Awards.
MENZIES offers a full range of services – tax, corporate finance, audit & compliance and business recovery, as well as strategic consultancy, outsourced HR & FD support, franchising and business valuations. Visit www.menzies.co.uk for more information.
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