Riots costs retailers nearly £400 million
High street retailers affected by the recent riots in London, Manchester, Birmingham and Liverpool could collectively lose £392 million in one week, research from shopping comparison website Kelkoo shows.
Business owners have already suffered estimated losses of £17.4 million due to looted stock and £43.5 million on repairs, according to figures produced by the Centre for Retail Research (CRR) for Kelkoo.
Commenting on the figures, Chris Simpson, spokesperson for Kelkoo, says UK retailers will continue to feel the effects of the riots "for several months to come".
"Much of the cost will be picked up by insurers but we cannot overlook the fact that on top of the damages caused, retailers, restaurants, pubs and other service providers have been forced to shut their doors to business in order to protect their staff, customers and premises."
Forced closures and the effect of locals avoiding perceived troublesome spots has cost shopkeepers and owners of small businesses £80 million in sales alone and these costs are likely to have long-term ramifications.
Stephen Robertson, director general of the British Retail Consortium, (BRC) says: "Inevitably some businesses, which have been attacked will never open their doors again. Banks need to offer good credit arrangements to those targeted so as many as possible have a chance to refit and reopen."
State support for businesses
In a written statement, business secretary Vince Cable says the government is "working closely with the British Bankers Association to ensure that affected businesses of all sizes, but especially small businesses, receive help".
As well as putting in place emergency helplines, Cable also says banks will make available "where necessary" short to medium-term finance arrangements for repairs and stock replacement.
In addition, communities secretary Eric Pickles has unveiled a £30 million riot support package. Two thirds of the funds will go towards the High Street Support Scheme, with the remaining £10 million going to help councils cover immediate costs.
Measures within the support package include financing building repairs and replacing equipment quickly so that businesses can get up and running more quickly.
The fund will also facilitate local councils to suspend business rate taxes to local firms. Councils that offer business rate relief are liable to pay a quarter of the cost but the support scheme will pay for this, while the government automatically pays the rest.
HM Revenue & Customs has also set up a 'civil disorder' phoneline (0845 3661207) dedicated to businesses struggling to pay their taxes.
Pickles says the government is "making immediate financial support available to those that need help", but adds that it is not just the state's responsibility to support local firms:
"I encourage every local resident to make an effort to shop locally in this and coming weeks and support the local high streets, which are the lifeblood of our communities."
The BRC's Robertson has welcomed the measures, saying: "Our biggest fear is that otherwise successful retailers will be pushed into insolvency by the events of this week.
"Suspending business rates on wrecked shops, flexibility on VAT collection and reassurance that shortfalls in insurance cover will be made up will all help substantially minimise that risk. Planning flexibilities on security measures should also extend to rebuilding."
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
Generally speaking, insolvency is to businesses what bankruptcy is to individuals. A company is insolvent if the value of its assets is less than the amount of its liabilities, or it is unable to pay its liabilities (loan payments) as they fall due. It’s an offence for an insolvent company to keep trading, so the main options available to an insolvent company are: voluntary liquidation, compulsory liquidation, administration or a company voluntary arrangement.