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Debenhams to file for administration after stores forced to close during coronavirus lockdown

Reuters
Reuters

Debenhams will file for administration to try to protect itself from legal action that could bring about the company’s collapse.

The struggling department store chain, which employs 22,000 people, faced being chased by suppliers and other creditors who have not been paid as a result of the coronavirus pandemic. Debenhams said it was preparing for all 142 of its stores to re-open once the coronavirus lockdown conditions are eased by the government.

The company said in a statement: “This move will protect Debenhams from the threat of legal action that could have the effect of pushing the business into liquidation while its 142 UK stores remain closed in line with the government’s current advice regarding the Covid-19 pandemic.”

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It came as new data showed the increasingly heavy economic toll caused by coronavirus, with construction slumping to its worst performance since the financial crisis, new car registrations plunging by more than 40 per cent and consumer confidence dropping at the fastest pace in more than four decades.

Some 203,000 fewer new cars were registered in March than during the same month in 2019, according to the Society of Motor Manufacturers and Traders (SMMT). A separate report from Auto Analysis and Global Data forecasts that manufacturers will lose out of $100bn (£82bn) in car sales as their factories lie dormant across Europe and North America.

Meanwhile, the UK construction sector suffered its largest job cuts since 2010 after measures to stop the spread of coronavirus halted work and caused a slump in new orders, according to new data.

The closely watched IHS Markit/CIPS construction purchasing managers’ index (PMI) dropped to 39.3 for March, from 52.6 in February.

Analysts had forecast that it would be a reading of 44.0 for the month, according to a consensus from Pantheon Macroeconomics.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said: “With no upturn in sight, and with the fastest level of lay-offs since September 2010, the sector is stuck in quicksand and sinking further.

There was also more bad news for retailers too, after a survey showed that consumer confidence fell off a cliff in the last two weeks of March.

People were asked about changes to their personal finances, the general economy and whether they feel now is the right time to make major purchases, during interviews between March 16 and 27.

The results produced an overall negative score in the “consumer confidence barometer” from GfK of minus 34, indicating a sharp decline in confidence of 25 points from a score of minus nine in mid-March.

Debenhams had been in trouble before the current crisis, which has seen all but essential shops close their doors. A year ago, the chain went through a restructuring process known as a pre-pack administration which saw lenders take controls and shareholders, including Mike Ashley’s Sports Direct, wiped out.

The 242-year old company is already in the process of closing around 50 stores as it seeks to slash costs and focus on profitable sites. Of those, 22 have shut so far.

Stefaan Vansteenkiste, chief executive of Debenhams, said on Monday: “These are unprecedented circumstances and we have taken this step to protect our business, our employees, and other important stakeholders, so that we are in a position to resume trading from our stores when government restrictions are lifted.

“We are working with a group of highly supportive owners and lenders and anticipate that additional funding will be made available to bridge us through the current crisis period.

“With their support and working with other key stakeholders, including landlords, pension trustees and business partners, we are striving to protect jobs and reopen as many Debenhams stores for trading as we can, as soon as this is possible.”

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Debenhams puts administrators on standby