Wilko fell victim to ‘perfect storm’ of rising prices and soaring mortgage rates, says insolvency expert
Wilko Administration 10 08 2023
Wilko was among the victims of retail businesses to be hit by the “nasty knock-on effects” of rising prices and higher mortgage rates, an insolvency expert said today.
The high street retailer today said it has appointed administrators after failing to secure a rescue deal.
Tom Davey, director and co-founder at Factor Risk Management said: “The predicted perfect storm of rising prices coupled with higher mortgage rates has finally hit UK consumers' spending power, with nasty knock-on effects for the retail industry."
The Bank of England has increased the base rate 14 consecutive times since February 2022, in an attempt to ease high inflation.
Wilko has appointed administrators
PA
Mr Davey said: "After a torrid period during the pandemic, and with continued supply issues and rising interest rates, many retailers will find the conditions impossible to survive in their current guise and we expect to see an increasing number of high profile companies restructuring and facing fire sales as a result of this.
"For companies such as Wilko, cheap capital has disappeared and this has led to a noticeable rise in both corporate and personal insolvencies over the past year.”
The insolvency expert warned these figures are “only likely to worsen”.
He said: "The cost of managing inflation will be paid for by individuals and struggling corporates who have survived on cheap credit, and it speaks to the economic climate that has prevailed for the last 15 years that a return to historically more normal interest rates is having, and will continue to have, such a damaging effect on individuals and the high street in particular."
Wilko’s CEO Mark Jackson today said the retailer had received rescue offers but could not secure a deal, and was left with “no choice” but to enter into administration.
He said: “While we can confirm we had a significant level of interest, including indicative offers that we believe would meet all our financial criteria to recapitalise the business, without the surety of being able to complete the deal within the necessary timeframe, and given the cash position, we’ve been left with no choice but to take this unfortunate action.”
Mr Jackson said the business had pressed ahead with a turnaround plan, including cost savings, which “would have delivered the most profitable Wilko ever recorded within 24 months”.
In an open letter, the CEO said: “Over the past six months Wilko has been very open that we’ve been considering options to accelerate a turnaround plan given that we needed to make significant changes to the way we operate to restore confidence and stabilise our business.
LATEST DEVELOPMENTS:
Wilko has more than 400 stores
PA
“We left no stone unturned when it came to preserving this incredible business but must concede that with regret, we’ve no choice but to take the difficult decision to enter into administration.
“We’ve all fought hard to keep this incredible business intact but must concede that time has run out and now we must do what’s best to preserve as many jobs as possible, for as long as is possible, by working with our appointed administrators.”
The chain, which sells a wide range of products from cleaning essentials and stationary to garden furniture, began as a single hardware shop in Leicester in 1930, growing to 408 stores.
Wilko shoppers have expressed their disappointment at the news. A customer told GB News: "I think it's really sad. I hate the way all the high streets have collapsed.
"This is such a lovely shop and all the people who work here are nice and it's full of really normal, old-fashioned, practical stuff that people need."