A day of reckoning looms for multichannel retailers as the end of the moratorium on debt collection from commercial landlords approaches. In just a month, landlords will be able to start to take action to collect on an estimated £2.9bn in accumulated rent debt owing on stores. The British Retail Consortium (BRC) warns that two-thirds of retailers currently face legal action in July – and that if no Government action is taken, thousands of shops could have to close.
A BRC survey of retailers that together turn over £12bn and have 5,000 shops has found that almost a third (30%) of retailers say they have already faced County Court Judgements (CCJs) from commercial landlords, and two-thirds have been told they will face legal action from July - once the moratorium comes to an end. In addition, 60% of landlords have given their tenants less than a year to pay back rent arrears racked up during the pandemic.
Rent debts have been built up over 15 months in which many had to close repeatedly because of the pandemic. One in seven shops already stood empty in the first quarter of this year, according to the latest BRC-LDC Vacancy Monitor.
Two-thirds of the retailers surveyed say that the Code of Practice introduced by the government last year to address outstanding debt issues is ‘ineffective’ because it is voluntary. The BRC now says the government must take action to introduce a fair way of managing the rent debt. That includes ring fencing rent arrears built up during he pandemic, and extending the moratorium on debt repayments to the end of the year. Protections on the debt should be extended in order to include CCJs, while compulsory arbitration should e brought in from January 2022.
Helen Dickinson, chief executive of the British Retail Consortium, says: “Many retailers have taken a battering over the pandemic, but they are now getting back on their feet and playing their part in reinvigorating the economy. The unpaid rents accrued during the pandemic, when most shops were shut, are a £2.9 billion ball and chain that hold back growth and investment and could result in a tsunami of closures.
“Government must ringfence the rent debts built up during the pandemic, giving retailers breathing space as they wait for footfall and cash flows to return. With this in place, all parties can work on a sustainable long-term solution, one that shares the pain wrought by the pandemic more equally between landlords and tenants. Without action, it will be our city centres, our high streets and our shopping centres that suffer the consequences, holding back the wider economic recovery.”
The findings come soon after a YouGov study suggested that UK shoppers were the most likely in 17 markets studied to buy only online – but that many still want to buy in-store. Most shoppers, it found, had shopped both online and offline in the three months leading up to the study, with 86% shopping online and 77% offline.