The RCHL (retail, consumer, hospitality and leisure) sectors have been subjected to huge pressure for almost a year because of the ongoing COVID-19 pandemic, leading to a 375% increase in CVAs in the sector.

In the UK between January and November 2019, an overall 339 CVAs were launched across all sectors compared to 238 CVAs between January and November 2020. This reduced number can be attributed to billions of pounds in Government support and a ban on winding up petitions as part of COVID-19 support measures.

Within this, 25 ‘large’ CVAs were launched by companies with revenue of more than £25 million between January and November 2020 compared to 13 between January to November in 2019.

Of these 25 large CVAs to November 2020, 19 were launched by RCHL firms from June onwards, reflecting the business climate facing these sectors at the time. In comparison, just four CVAs were agreed across the same period in 2019 - nearly a five-fold increase. Additionally, since the start of November, proposals for six more RCHL CVAs have been made public.

Analysis of 17 of these CVAs finds almost eight in 10 of 2,992 business sites across the UK secured agreements with landlords to amend lease terms, enabling large sections of business real estate to remain operative.

In Scotland, 207 sites were affected by these 17 CVAs. Analysis of these CVAs north of the Border found that 81% of business sites secured agreements with landlords to amend lease terms, while 18% ceased trading.

Edinburgh saw 59 properties affected by CVAs, with casual dining and fashion brands most impacted. In Glasgow there were 40, while in Aberdeen there were 21. High streets in smaller cities were also casualties of CVAs – with the likes of Stirling, Inverness and Kirkaldy all seeing more than 10.

Breaking down by sector, 89 of the impacted businesses were in the casual dining sector; 67 in fashion; 41 in hospitality and 10 in leisure centres.

Jason Higgs, head of retail at PwC Scotland, commented: “Last year brought challenges to the high street which could scarcely have been imagined in worst case scenario planning. The closure of shops for repeated periods of lockdown, along with reduced footfall, has led to a number of large companies turning to CVAs as an effective means of survival, with measures including raising new funds from lenders or shareholders, rent reduction and reducing property portfolios.

“The objective of such measures is to provide companies with the best possible chance of continuing to trade as a going concern. Our analysis has found different measures have been pursued by companies with the most successful generally being CVAs delivered as part of a full restructuring with all stakeholders sharing the burden and new funds being injected, rather than those that have focused on landlords in isolation.”

The vast majority of sites in the 17 CVAs analysed (79.7%) saw changes to their lease terms. For the sites where changes were proposed, these included:

• Transition to turnover-based rent
• Rent reductions
• Write off of arrears
• Changes to payment terms - often a shift from quarterly to monthly rent payments.

In a further 15.7% of remaining sites, companies planned to cease trading and ultimately exit the site. In total, only 138 sites (4.6%) continued under the same terms they had agreed previous to the CVA.

The analysis found that 12 of the 17 CVAs analysed - more than 70% - also asked creditors for concessions lasting for a duration of two years or more.