Partner Article

Quarter day reform could help struggling retail sector

Steve Ross, chair of insolvency trade body R3 looks at changes to the Quarter Day rental arrangements, and what it might mean for retailers.

Steps to smooth cashflow pressure on retailers, such as replacing the long-standing Quarter Day rental arrangements for commercial premises with a monthly option, could give struggling High Street retailers more breathing space in their battle against online rivals. Recent Office for National Statistics showed a 10.3% year-on-year rise for May 2013 in the value of online sales in Britain, whilst the total value of retail sales rose by only 3.1% over the same period, thus highlighting the growing threat of the internet to ‘shop window’ retailers. The quarterly rent payments which traditionally fall in March, June, September and December represent a significant outgoing for struggling firms, and numerous well-known High Street names have fallen into administration in either the run-up to or days immediately following Quarter Days over the last few years, as the pressure to meet their rental obligations has finally proved too much for their finances. These are the first real growth signs we have seen across the retail sector for a long time, but for those businesses relying on a physical High Street presence, the Quarter Day deadline could prove one burden too many when it comes to remaining competitive with e-commerce. Many High Street retailers are having to manage long-term leases which were agreed in more positive economic times, and coupled with the meteoric growth of online retail, the size of quarterly rent bills means this is a dangerous period for some businesses in a sector which is just starting to turn a corner. The last thing anyone wants to see is more empty shops, with more landlords out of pocket. I would advise any retailers struggling to meet their Quarter Day obligations to begin negotiating with their landlords as quickly as possible, so that solutions can be found to stave off any potential insolvency. Business owners could discuss paying rent on a monthly basis, or even negotiating turnover-linked rents to help them manage their cash flow more effectively. At the same time, retailers should look at ways to embrace or further develop the selling power of the internet, such as ‘click and collect’ options, which help drive customers to stores. Ultimately, adopting and innovating such strategies will be fundamental to the longer term survival of the High Street.

This was posted in Bdaily's Members' News section by Steve Ross .