Nearly 6,000 jobs at risk as Toys R Us and Maplin face collapse

28th February, 2018

The bleak wintry weather brought on by the beast from the east is set to mirror the mood on the high street as not one but two major retailers face collapse. The latest victims of the cold retail climate, Toys R Us and Maplin, join numerous well-known chains who have battled a lethal Molotov cocktail of online competition, rising costs, and diminishing consumer spending.

Discussions with Edinburgh Woollen Mill to save Maplin, the electrical retailer with 200 UK stores employing 2,500 people, have broken down just hours before the deadline to agree a solvent sale of the business. These discussions came after a difficult Christmas period for Maplin, which saw sales drop by 7% partially due to the loss of suppliers’ insurance on Maplin’s goods, resulting in stock shortages. PwC are now said to be lined up to be appointed as Administrators.

In December, Toys R Us, the UK’s biggest toy retailer, which employs 3,200 staff, revealed plans to close at least 26 stores in the UK as part of a proposed Company Voluntary Arrangement (CVA) following weak Christmas trading. The beleaguered retailer only survived the Christmas period after the PPF agreed at the 11th hour to vote in favour of the CVA, safeguarding thousands of jobs in the run up to Christmas.

Since then the retailer has been engaged in a frantic search for a buyer which has left it with little hope of paying a £15m VAT bill or £50m to repay lenders. However, following weeks of talks with potential investors to secure a £120m lifeline Toys R Us looks set to crash into Administration as talks broke down. This insolvency could leave the PPF with a bill of about £37m as it absorbs the company’s pensions’ liabilities. Moorfield Debt Recovery is understood to be in line to handle the Administration.

The impending collapse of both retailers comes just a couple of weeks after Visa’s consumer spending index showed cut back on spending for the first time in five years in January, with the sharpest decline taking place on the high street. This follows weak expenditure trends in 2017 carrying into this year as households face rising living costs and diminutive wage growth. All in all, January’s credit card index and the looming retail Administrations continue to send a winter’s chill through the high street.

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