Experts have warned “all is not well” on Britain’s high streets, after two household name stores announced thousands of potential job losses as they collapsed into administration on the same day.
Electronics store Maplin and Toys ‘R’ Us both announced they were going into administration, putting more than 5,500 jobs at risk in their stores, with Maplin blaming in part the fall in the pound’s value since the 2016 referendum.
Industry watchers noted both businesses had lost out to online shopping and not done enough to change the experience they offered to cope with
The announcements came within an hour of each other on Wednesday, the same day estate agent Foxtons announced a 65% fall in profits that it blamed partly on “political uncertainty” and its affect on house sales in London.
Also on Wednesday, ITV announced a 5% fall in advertising sales because of the “uncertain economic environment”.
Maplin chief executive Graham Harris said: “The business has worked hard over recent months to mitigate a combination of impacts from sterling devaluation post Brexit, a weak consumer environment and the withdrawal of credit insurance.
“This necessitated an intensive search for new capital that in current market conditions has proved impossible to raise. These macro factors have been the principal challenge not the Maplin brand or its market differentiation.”
Zelf Hussain, joint administrator at PwC of Maplin, said the electrics store had been “hit hard by a slowdown in consumer spending and more expensive imports as the pound has weakened”.
Anti-Brexit campaigners Open Britain hit out, with Labour MP Peter Kyle saying: “Since the referendum the pound has taken a battering.
“That has led to inflation which has squeezed pay and profits, and uncertainty about our economic future has continued to grow. Far from ushering in a bright economic future, the threat of Brexit has put jobs and investment at risk.
“The fact is that the Brexit we were promised in the referendum simply cannot be delivered.”
Reacting to Toys ‘R’ Us, Richard Lim, chief executive of Retail Economics, said: “All is not well on UK high streets. The perfect storm of spiralling operating costs, softer consumer demand, and seismic structural changes has claimed another victim.”
Chris Edger, a professor at Birmingham City University’s business school, said Toys R Us and Maplin were “living proof” that businesses’ efforts to reorganise their finances without “a consumer focus ultimately accelerate decline to inevitable termination”.
“Private equity plus distressed retail equals collapsed assets,” he said.
Mark Deverell, a commercial litigation lawyer at Gorvins Solicitors, said: “Historic leases and high rent obligations coupled with inflation, increases to the living wage and the huge competition for a declining spending public, who prefer online shopping to venturing onto the high street, it’s likely these will not be the last big names to disappear.”
Simon Renshaw, from AABRS Insolvency Practitioners said: “What we’re seeing at the moment does appear to be an emerging trend that does not speak well about the core health of the economy.”
He added Toys R Us and Maplin came shortly after Carillion’s collapse and there added there were “continued concerns” about other companies that could be affected by today’s news.
“Many retailers will be looking nervously over their shoulder in the coming period,” he said.
A total of 3,200 jobs are at risk with Toys ‘R’ Us about to enter administration and Maplin puts 2,500 jobs at risk.
Rebecca Long-Bailey, Labour’s Shadow Business Secretary, called the risk posed to jobs at Maplin and Toys ‘R’ Us “devastating”, adding: “This latest shock in the retail sector continues a worrying trend for our shopping streets and centres.”