Two High Street chains with 4,500 staff collapse as they become latest victims of coronavirus crisis
Two High Street chains with 4,500 staff collapsed yesterday as they became the latest victims of the coronavirus crisis.
Italian restaurant group Carluccio’s went into administration along with rent-to-own retailer Brighthouse.
Julie Palmer of corporate recovery business Begbies Traynor said ‘coronavirus was the final nail in the coffin’.
Bankruptcy: The late Antonio Carluccio with his restaurant chain, and (inset), a Brighthouse store
Carluccio’s was founded by Italian chef Antonio Carluccio in 1991, and bankruptcy puts the future of its 71 UK restaurants and 2,000 employees in doubt.
At the same time, another 240 stores and 2,500 jobs were hit by the collapse of Brighthouse, whose customers make monthly payments for goods such as televisions and washing machines, in effect renting them until they have paid in full.
It is likely that customers with outstanding mis-selling complaints against Brighthouse will receive only a fraction of the compensation they had hoped for. The firms toppled within 72 hours of the Government announcing emergency reforms to insolvency rules, designed to give companies running out of cash more time.
That both still fell into administration was seen as a sign of how hard the businesses are being hit by the shutdown.
John Colley of Warwick Business School said: ‘This is Darwinist survival of the fittest compressed into six months. Business will not be the same again.
‘Many businesses simply do not have access to adequate cash or credit lines and will disappear during the next six months – only the strongest will survive.’
Laura Ashley became the first casualty of coronavirus when it went bust earlier this month.
The High Street was already reeling from its worst year for a quarter of a century even before the lockdown.
Shops and restaurants have been relieved of their business rates bills until April 2021, but many still have to pay rent and some wages through the lockdown.
Yesterday Carluccio’s confirmed it had hired advisory firm FRP to oversee its administration after a ‘sustained period of challenging trading conditions’, exacerbated by the pandemic.
Carluccio’s faced ‘significant cash flow pressures’ on the back of the outbreak and was therefore unable to meet its financial obligations.
The administrators said they are in talks regarding a potential sale of the business or its component parts, for example its restaurants and brand.
Most of the company’s 2,000 staff will be temporarily laid off, or ‘furloughed’, with 80 per cent of their wages covered by the Government’s Jobs Retention Scheme, until a plan is made for the future of the business.
Last week, staff from the chain saw their wages for the past month slashed in half as part of cost-cutting measures to fight the impact of the pandemic, while chief executive Mark Jones gave up his pay for the whole month.
Geoff Rowley, joint administrator and partner at FRP, said: ‘We are urgently focused on the options available to preserve the future of the business and protect its employees.’
The collapse of Carluccio’s raised fears that popular restaurants could be allowed to go bust, and then bought cheaply out of administration. Private equity firms, who own casual dining chains such as Pizza Express, use large amounts of debt as part of their business model, putting them at greater risk of going bust in a downturn.
Brighthouse yesterday confirmed it had appointed Grant Thornton as administrators, who will continue trading its online business.
The chain, which has 240 UK stores and around 200,000 customers, had closed all its shops in line with Government rules.