Retail company voluntary arrangements: A dubious remedy?

Abstract

Despite much debate on Company Voluntary Arrangements (CVA) among UK retailers, understanding of retail CVAs remains limited. There is continuing uncertainty about the uptake of CVAs, what aspects lead to successful outcomes and whether CVAs can be viewed as a remedy for struggling UK retailers. To address these questions, we developed and analysed a novel and detailed dataset of Companies House records for the population of retailers' CVAs between mid-2012 and early 2021. We find that CVAs, despite detrimental impacts on other actors (landlords and suppliers), can be a useful tool for some retailers in adjusting to the new market conditions. The uptake of CVAs among retailers is stable, though not among large retailers. Retail CVAs help to avoid immediate business failure, but we found limited evidence of the success and efficient longer term outcome of the procedure, suggesting that alternative methods could be considered. The success and efficiency of CVA do not seem to depend on the size of the business, but there are variations in both the uptake and efficiency of CVAs across retail sub-sectors. This suggests that a range of mechanisms are required to cater to the different needs across retail categories. Despite the market challenges, CVAs are not prolonged on average. However, longer duration CVAs seem to have a lower chance of succeeding and of being efficient implying that CVA cannot remedy fundamental business issues. Finally, we observed differences related to who oversees the procedure, suggesting that greater emphasis should be put on upskilling and selection of insolvency practitioners.