Member Article

Quarter Day brings threat of insolvency

Quarter day is set to have serious implications for North East businesses, as many struggle to find the funds to meet their rental obligations.

Following the news that video game retailer Game Group is set to go into administration, a regional insolvency expert is warning businesses to take decisive action to mitigate any rent-related problems they may be facing before they become too much to handle.

Quarterly rent payments fall in March, June, September and December and represent a significant outgoing for struggling firms.

Last June saw the largest wave of retail administrations since the height of the recession, with well-known names including Habitat and the Officers Club falling into administration in the surrounding period to Quarter Day.

Steve Ross, chair of the north east arm of insolvency trade body R3 and a director in the Corporate Recovery department of the Sunderland office of accountancy firm RSM Tenon, said: “Game Group is unlikely to be the only company facing rent agony around March’s Quarter Day, and whilst the fact that the payment date falls on a weekend this month could mean that these problems are delayed for a few days, the insolvency pattern that has intensified since the recession began in 2008 is almost certain to be repeated.”

In their most recent Business Distress Index, R3 measured a range of positive and negative business indicators across different market sectors and parts of the country. They found that businesses in the retail sector were most likely to be concerned about their debt levels, after battling months of difficult trading and market conditions.

Game is one such business who has buckled under the strain. The firm’s management team fined a notice of intent, after it was revealed that the firm was facing a £21 million rental bill for its 1,300 branches. It is likely that 6000 UK employees will now face redundancy.

Mr Ross continued: “Negotiating with landlords in good time is the key to staving off rent-related insolvency, although of course directors must take care to avoid trading illegally whilst insolvent.

“Suggesting measures like paying rent on a monthly or ‘pay as you go’ basis could give retail businesses the chance to plan their cashflow more effectively, and landlords are usually wise enough to realise that getting a proportion of what they were due is better than getting nothing from someone who’s gone out of business.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .