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High Street collapse sees £2bn owed

Category: Scottish Economy — Paul Morgan on July 8, 2013

The failure of many High Street retailers in the UK has seen £2 billion worth of debts to creditors with unsecured debts going unpaid, according to recent research.

As well as major failures from the likes of Blockbuster, Comet and HMV, many other household and locally respected retailers have fallen over recent years. With secure lenders, such as banks, always getting preferential payment of debts, it has left many suppliers out of pocket.

It is not just failing companies that risk the future of their suppliers either. In the UK, it is becoming increasingly normal for invoices to remain unpaid for weeks and even months after the agreed payment terms.

This is risking the whole chain of supply, though many firms are tackling the issue with the help of invoice factoring and invoice discounting facilities, which advance cash.

With all of the failures over the past few years, just £14 million has been directed back to unsecured creditors. Nearly £365 million was directed to banks and £123 million on charges.

Administrators of the insolvent companies made £33 million from the process, more than two times the amount paid to many of the failing firm’s creditors.

This has angered many. However, the body which represents the Insolvency industry, R3, defended the profits.

The body’s president, Liz Bingham said:

“…the sheer amount of manpower that goes into these cases is often underestimated.”

The research was completed by business intelligence firm Company Watch, as part of an independent review into the state of the modern UK High Street.

'Disclaimer: The information contained in these articles is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

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