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Thousands of jobs at risk as Toys R Us readies for collapse

Hannah Boland
Toys R Us had been hoping to secure funds to allow it to implement a five-year turnaround plan - REUTERS

Toys R Us has lined up administrators as fears mount that the UK business will collapse early next week putting up to 3,200 jobs at risk.

The news that management are readying for insolvency comes after weeks of crunch talks with investors and potential buyers, with bosses of the retailer's UK arm attempting to secure a £120m lifeline to pay off lenders and overhaul operations.

Toys R Us had been hoping to implement a five-year plan using the funds, cutting staff and stock ranges, and shutting stores. It was asking potential buyers to make a £50m payment immediately to pay off lenders of its US parent company, which entered bankruptcy protection in September. 

However, management appears to have lost faith that such a deal will be agreed, with sources telling The Daily Telegraph that Moorfields Corporate Recovery had been lined up to handle the administration.

It is thought that, unless Toys R Us receives a major cash injection, administrators will be appointed on Tuesday, and that the group met with the Pension Protection Fund on Friday to warn them about the development. The news was first reported by Sky.

Toys R Us has struggled to stay afloat recently, having posted a loss for seven of the last eight years amid dwindling shopper footfall and increasing competition from online retailers such as Amazon and Argos. 

Toys R Us feature

It had been close to collapse late last year, but was given a last-minute reprieve after its restructuring plan received approval from the UK's pensions lifeboat.

The move, which saw the retailer promise to pump more funds into its pension scheme, had meant at least 26 stores were set to close, but had saved thousands of jobs. Those Toys R Us workers now face further uncertainty over their future.

Should the company collapse, it would be yet another sign of tough conditions in the market, following a string of insolvencies with names such as Multiyork and Jaeger among those leaving the high street.

Figures compiled by Deloitte showed that the number of retailers toppling into administration was up for the first time in five years in 2017. 

And there are no signs this year will prove any easier, with forecasts from the Centre for Retail Research suggesting the number of shops across the UK this year will fall by 22pc to 220,000. 

Toys R Us and Moorfields both declined to comment.