Retail company voluntary arrangements – A dubious remedy?
Wiejak-Roy, Grazyna; Lamond, Jessica
Authors
Mrs Grazyna Wiejak-Roy Grazyna.Wiejak-Roy@uwe.ac.uk
Senior Lecturer in Real Estate and Economics
Jessica Lamond Jessica.Lamond@uwe.ac.uk
College Dean for Research & Enterprise
Abstract
Despite industry concerns about UK retailers’ use of Company Voluntary Arrangements (CVA), there is continuing uncertainty about the nature of CVAs in the retail sector, what aspects lead to successful outcomes, and whether CVAs can be viewed as a successful remedy for struggling UK’s retailers, in particular in the wake of the pandemic when UK retailers were hard hit. Retail CVAs are under-investigated. To address this research gap, this is the first population study looking at retailers’ CVAs between mid-2012 and early 2021 (n=284). To investigate them we developed and analysed a novel and detailed dataset of Companies House records. We found that, regardless of detrimental impacts on other actors (landlords and suppliers), CVAs can be a useful tool for some retailers in adjusting to new market conditions. The uptake of CVAs among retailers is stable though not among large retailers. Retail CVAs help to avoid immediate business failure, but we found limited evidence of the success and efficient longer-term outcome of the procedure, suggesting that alternative methods could be considered. The success and efficiency of CVA do not seem to depend on the size of the business but there are variations in both CVAs’ uptake and efficiency across retail sub-sectors. This suggests that a range of mechanisms are required to cater to the different needs across retail categories. Notwithstanding the market challenges of e-commerce and post-pandemic conditions, CVAs are not prolonged on average. However, longer duration CVAs seem to have a lower chance of succeeding and of being efficient implying that the CVA procedure cannot remedy fundamental business issues. Finally, we observed differences related to who oversees the procedure, suggesting that greater emphasis should be put on upskilling and selection of insolvency practitioners.
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