One in ten retailers are facing oblivion: French Connection warns it will run out of cash within months
One in ten retailers are facing collapse and will not survive another month of the coronavirus lockdown, with French Connection among the latest to sound the alarm.
The pandemic has pushed more than 500,000 firms to the brink of insolvency. And the pressure on them is growing by the day, a poll for the Centre for Economics and Business Research (Cebr) found.
The worrying findings emerged as French Connection warned it was in danger of running out of cash within months unless lenders come to its aid.
Fashion chain French Connection said it had been denied loans from the Government due to ‘tight qualification restraints’ and was now seeking an urgent cash injection from investors
Most ‘non-essential’ shops and eateries have been forced to close because of the lockdown.
The restrictions are not due to be lifted until June at the earliest. That has hammered the revenues of retailers. Even a rise in online sales has not been enough to stem the losses many are facing.
The Cebr/Opinium survey published yesterday found that around 510,000 businesses are thought to be at risk of collapse, with 9 per cent of those in the retail and wholesale sectors claiming they will not survive another month under the current conditions.
The findings will add to growing fears for High Street businesses after industry body the British Retail Consortium warned that normal trading was not expected to return ‘for some time’ and consumers were likely to remain cautious even as lockdown measures are lifted.
The survey also revealed most firms now believe they will need seven months to recover.
Pablo Shah, a senior economist at Cebr, said: ‘Long-term damage to the economy is stacking up. Businesses now anticipate needing 28 weeks after restrictions are lifted to return to pre-crisis levels of production.
French connection founder and boss Stephen Marks owns a 41.5 per cent stake in the chain
‘Meanwhile, the estimated number of businesses at high risk of insolvency remains alarmingly high.’
Troubled fashion chain French Connection said it had been denied loans from the Government due to ‘tight qualification restraints’ and was now seeking an urgent cash injection from investors.
Online sales in the UK and US surged by 44 per cent in the past six weeks but it did not expect to return to normal levels of trading for some time.
And although it has relieved some pressure by furloughing staff and received business rates relief for its stores, the firm has still taken a massive hit from the lockdown.
The company said it had £8.1million of cash left at the end of January and the board is in talks with potential funders, as well as suppliers, landlords and factories in a bid to cut costs.
It was already under financial pressure before the pandemic, having not posted an annual pre-tax profit since 2012.
Shares have plunged by more than 80 per cent this year and initially fell by 24 per cent in early trading yesterday, before recovering to trade 1.3 per cent up.
French Connection was previously put up for sale but this plan was abandoned in January, with bosses instead launching a turnaround effort.
Founder and boss Stephen Marks owns a 41.5 per cent stake, while Sports Direct tycoon Mike Ashley is the second-largest shareholder with a 26.1 per cent stake.
The turmoil followed the collapse of fashion brand Laura Ashley due to the impact of the pandemic. Debenhams has also gone into administration for the second time in a year.