Radical retailer restructurings are becoming the norm

Retailers are being squeezed from both sides. On the cost front, post-Brexit inflation, rising input costs, and the April hike in employer national insurance contributions (NICs) have eroded margins, particularly for smaller firms without the scale to automate or absorb the pressure. Meanwhile, retail sales suggest a mixed outlook. Total sales increased by 3.1% year-on-year in June, according to the British Retail Consortium (BRC). However, many retailers are looking beyond the seasonal uplift to the Autumn Budget’s expected business rates reforms. More broadly, the UK’s economic recovery is fragile, and consumer confidence remains volatile due to fears over personal tax rises and inflation. This uncertainty drives cautious spending, which suppresses sustained growth and complicates restructuring outcomes.

Several pivotal creditor votes scheduled for August could trigger further store closures, rent concessions, and operational contraction. The NIC hike has compounded longstanding cost burdens – from wage inflation and business rates to supply chain reorganisation, regulatory change, and rising demands around digitalisation, automation, cybersecurity, and sustainability. Many SMEs are unable to absorb the growing complexity of financial and operational pressures, undermining viability and accelerating the need for structural reset.

Poundland and River Island

Turnaround investors and private equity firms are actively targeting retailer distress through radical restructuring plans and deep operational resets. Poundland and River Island are two prominent examples of ongoing court-supervised restructurings aimed at addressing acute financial distress, driven by rising operating costs, intensifying competition, and shifting consumer habits. Both plans propose store closures, lease renegotiations, and cost-cutting, and will be put to creditor votes in August. They illustrate the broader trend of court-assisted restructurings designed to shift the burden of operational reset onto landlords.

Poundland: bold rent-free proposal

Poundland, acquired by Gordon Brothers in June 2025 for a nominal €1, is undergoing a sweeping operational reset after years of underperformance and a 6.5% decline in revenues over the six months to March 2025.

Gordon Brothers, the specialist global distressed investor, has pledged up to £80 million in financing to support Poundland’s turnaround. Central to the plan is a bold proposal to reduce rent to zero on up to 250 underperforming stores. This presents a clear dilemma for landlords: accept temporary rent-free terms or risk a full administration that could trigger widespread closures across Poundland’s 800-store estate. For landlords with significant exposure to Poundland tenancies, short-term rent-free concessions may be preferable to the deeper losses and prolonged vacancies that could follow a full collapse.

Gordon Brothers is also seeking rent cuts of 15-75% across dozens more locations to further ease fixed cost pressures. Poundland’s uncertain future has impacted supplier confidence. Major brands – including Nestlé, Procter & Gamble, and Unilever – have reportedly tightened credit terms, creating stock shortages. With over 2,000 jobs at risk, the success of the plan hinges on landlord and supplier cooperation.

River Island: a profit-sharing model for creditors

Under River Island’s restructuring plan, the family-owned fashion retailer reportedly proposes to mitigate losses for compromised creditors through a profit share fund for unsecured creditors. This novel approach aims to balance creditor recovery with operational survival, potentially making the plan more appealing to landlords and other stakeholders. The proposal includes the closure of 33 unprofitable stores out of a 230-strong portfolio, with a further 71 at risk, and lease renegotiations across 50 sites seeking rent cuts of up to 50%.

Beyond the big names: sector-wide fragility

There are several other notable distressed retailers at varying stages of resolution, including:

•  Hobbycraft, which completed a CVA in May under Modella Capital (acquired August 2024). Nine stores are confirmed for closure, with 18 more at risk, pending rent negotiations.
• The Original Factory Shop (TOFS), acquired by Modella Capital in February 2025, completed a CVA in May, seeking rent cuts on 88 of its 178 stores and closing its distribution centre, putting nearly 1,000 jobs at risk. The company reported a £5.6 million pre-tax loss for the year to March 2024.
• Claire’s, the jewellery chain with around 300 UK stores, is seeking external investors amid £25 million in UK losses and a looming £355 million loan maturity. It has been hit by currency volatility, import tariffs, labour shortages, and rising transport costs.
• Quiz, the fashion retailer, reported a £4.7 million loss for the six months to September 2024 and warned of a funding shortfall by early 2025.

Policy risk on the horizon: business rates reform

Retailers are also reportedly bracing for business rates reform in the Autumn 2025 Budget, with proposals to introduce a surcharge on larger retail properties to fund relief for smaller businesses.

Under current rules, retail businesses receive a 40% rates discount (capped at £110,000), costing the Treasury £1.7 billion annually. From April 2026, this will be replaced by a lower multiplier for properties valued under £500,000, funded by a surcharge on higher-value stores, effectively shifting the burden onto anchor tenants and larger-format retailers.

While the government intends to increase support for smaller retailers, larger operators warn the policy could backfire. Marks & Spencer, in evidence to the Communities and Local Government Secretary, warned that the proposal could lead to the closure of 111 stores, particularly in the West Midlands and North East. M&S cautioned that penalising anchor tenants – who drive footfall and support surrounding retail – risks a “false economy”, potentially accelerating distress rather than fostering retail recovery. A new higher rates threshold risks pushing retailers to rethink their existing store portfolios and future investment plans. This, in turn, could harm local communities by costing jobs and reducing footfall.

Conclusion

There are likely to be further retail restructurings and CVAs in the second half of 2025. Deciding which approach makes sense requires forensic attention to company-specific circumstances – including funding options, lease exposure, and stakeholder priorities. Begbies Traynor Group is well placed to support both retailers and private equity owners of distressed assets in navigating the full range of restructuring and recovery options. If you would like to discuss your circumstances in confidence, please get in touch with us today.