Half of retailers face administration by the end of the summer due to coronavirus lockdown

HALF of major retailers in the UK face falling into administration by the end of the summer as they struggle to manage their cash flow during the coronavirus lockdown, a new report has suggested.

A study of 34 major non-food retailers in Britain found that five already had negative cash flow before the pandemic even began, relying on credit to fund any investment.

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The news comes as Britain was warned of pay cuts and up to two million job losses caused by the corona­virus lockdown.

Treasury forecasters fear the economy faces its worst slump on record.

Unemployment could rocket to 3.4 million and the deficit may spiral to £218 billion this year.

The figures, produced by the Office for Budget Responsibility, predict the worst GDP slump in a single quarter since records began in 1908.

Separately, The International Monetary Fund warned the global economy will suffer its deepest plunge since the Great Depression of the 1930s.

The high street has already begun to feel the pinch.

The report on retailers found that even if sales dropped 10 per cent during the lockdown period, more than two-thirds of retailers would fall into negative cashflow, according to the new report from global professional services firm Alvarez & Marsal and Retail Economics.

But it suggests that sales are set to drop as much as 70 per cent - putting every retailer sampled into dangerous territory.

The retailers studied included Next, Card Factory, Shoe Zone, Mulberry, John Lewis and Dunelm.

A number of retailers have already suffered in the last few weeks, including Debenhams, which officially entered administration for the second time in 12 months last week.

And it also emerged this week that Warehouse and Oasis are close to appointing accountancy firm Deloitte to handle an insolvency process.

The report suggested that even with Government help, more than half of the retailers will run out of cash within six months.

At the moment, retailers are being helped by Government measures including a business rates holiday and the furlough scheme, which pays some of employees’ wages.

They are also being protected from eviction and are being offered other help to manage any loans they may have.

If the lockdown only lasts three months, most large retailers will be able to weather the storm, the report suggests.

But if it lasts through the summer, demands on retailers’ cash will intensify and they will have to seek alternative funding in order to pay things like rent and labour costs.

Richard Fleming, managing director and head of restructuring, Europe, at Alvarez & Marsal, said Government measures had so far spared many brands from immediate collapse.

Some retailers are working out how to operate during the lockdown.

Fashion retailer Next reopened its website this week, two weeks after it shut down over coronavirus fears.

But others are struggling.

At the end of last month, Brighthouse and Carluccio’s went into administration, putting 4,500 jobs at risk.