By Patrick Corby
Jessops, the camera retailer, is poised to fall into administration as soon as the 16th January in what is the first high street recessive causality of 2013.
The company partly owned by HSBC through debt – equity swaps three years ago, has over 200 stores and 2,000 employees.
PwC was appointed as administrator after Jessops failed to secure fresh bank finance this year and suppliers started pushing for promoter payments.
“Over the last few days the directors, funders and key suppliers have been in discussions as regards additional consensual financial support for the business. However these discussions have not been successful. In light of these irreconcilable differences the directors decided to appoint administrators” said Rob Hunt partner at PwC.
Last Wednesday Play.com also announced that it would shut down its retail in response to a tax loophole, exempting VAT on items sold under £15, was closed. Meaning that now 10% of the electrical sector has now exited the market.
Jessops is the first expected failure is the first in 2013 and just another in a long series of insolvent firms failing including JJB Sport, Comet, Blacks, Peacocks, Clinton Cards and now HMV Group and Jessops are expected to join the list of failed UK zombie firms.
Research by Deloitte, the consultant group, shows that 165 retailers went into administration in 2010, 185 in 2011 and a total of 194 retailers fell into administration in 2012 which accounted for more than half of the sector at the time.
2012 was the worst year for retail since the economic contraction in 2007 began, with 4,000 firms and 48,000 employees affected. Outside of the retail sector administrations fell by 9 per cent across all sectors in 2012 at 1,833 compared with 2,010 in 2011.
The cause is a mix of overleveraged company debt leading up to the 2007 crisis causing economic deflation and contraction and consumer demand falling as income is used more for saving and paying off personal debt. Then there is the consumer move to the internet as a cultural shift occurs to cheaper and more efficient alternatives.
Jessops now has sales up to 50% as it tries to sell off its stock, but as of today has shut down orders via its website