2018 was a turbulent year for UK business. With economic uncertainty at a post-recession high and Brexit continuing to blight the political landscape, several large businesses finally went into administration after struggling for sales.
It’s never a good time to report on business bankruptcy but it is, however, important to understand the current financial climate.
Market analysis can help us to learn how and where things went so wrong for these high-profile consumer brands and perhaps enable us to avoid similar situations in the future.
Some of 2018’s casualties were household names which will be sorely missed by the UK’s general public. Here are the top five businesses that went bust in 2018.
Toys ‘R’ Us
In February 2018, Toys ‘R’ Us finally went into administration following years of falling sales. In seven of the last eight financial years, the toy retailer recorded a loss, with rising costs and weakened consumer demand cited as direct causes. Toys ‘R’ Us in the UK is a subsidiary of the US business which itself has been struggling with billions of dollars of debt. It seems like it was only a matter of time before the toy giant went under.
Across the UK, around 3,000 jobs have been lost with all 105 Toys ‘R’ Us stores now closed. Failure to meet their £15m VAT bill meant that administration was ultimately the only option.
House of Fraser
The complexities of commercial property leasing came to the fore as Sports Direct owner Mike Ashley struggled to save the future of House of Fraser stores across the UK. The struggling department store went into administration on 10th August 2018 and later that day, the stores, brand and stock were bought by Mike Ashley for £90m in cash.
Since then, at least 20 stores have stayed open because of rent reduction negotiations. Many landlords, however fought hard against the restructuring plans. Since the new owners settled a court dispute with building landlords, more store closures look certain in 2019. It is expected that the coming closures will mean the loss of around 6,000 jobs.
Clothing retailer, Coast went into administration in October 2018. Parts of the brand were almost immediately bought by UK retailer Karen Millen. This sale has saved 600 jobs at Coast but all 24 stand-alone stores will close. 300 jobs have been lost in the closures but executives at Karen Millen are excited about the future prospects of the brand.
Coast’s financial difficulties came as a direct result of House of Fraser’s financial problems. It was reported that when House of Fraser went into administration earlier in the year, it owed the clothing retailer more than £931,000.
Electronics experts Maplin finally closed its last store in June 2018. The electronics retailer announced it was in administration only hours after Toys ‘R’ Us went bust in February of the same year. Chief executive Graham Harris cited: “The devaluation of sterling during the Brexit process, the withdrawal of credit insurance, and a weak consumer situation” as crucial factors of the business’ demise.
200 Maplin shops have closed across the UK with around 2,500 staff being made redundant. In a surprising turn of events, Maplin’s online brand was bought by Dragon’s Den star Peter Jones. The website is currently live and awaiting a ‘relaunch very soon’.
In June 2018, budget retailer Poundworld went into administration. By the end of the Summer, all 250 Poundworld stores had closed along with its warehouse, head office, and distribution network. Over 4,000 jobs were lost as a result of the closures.
Initially the High Street retailer looked like it would be saved, with a deal to be bought by Irish retailers Hendersons seeming likely. The deal collapsed however, after a miscommunication between the Henderson family and administrators Deloitte.
And only days into 2019: HMV
Just days into 2019 and music giant HMV has filed for administration for the second time. After going bust in 2013, HMV was bought by current owners Hilco. Further decline in the UK DVD and CD market and a rise in online shopping and online music streaming services have made it increasingly difficult for the already struggling retailer to make ends meet.
All 125 UK stores currently remain open while a buyer is sought. Administrators have confirmed that they have received interest in the business but at this stage are unable to give any details about any potential buyers.
So, 2018 was a difficult year for UK businesses. With the Brexit situation still unresolved and online shopping continuing to rise, the future of UK retail looks uncertain. Only time will tell if we are to see more big name business casualties as we head further into 2019.