Businessmen fiddle on while the high street burns

December 30th, 2008 by admin | Filed under Daily News, Debt, Recession, Retail.

In the past few days, retail businesses have gone down in flames and seemingly arisen unscathed from their own ashes within days to carry on trading.

Three high street retailers – tea and coffee specialists Whittard’s, men’s fashion house Officers Club and now fashion chain USC – have agreed ‘pre-pack’ administrations within the last week.

A pre-pack administration is where a buyer has agreed to strip the profitable assets from a business and carries on trading as a new company, leaving the debts and unprofitable parts of the business behind for someone else to deal with.

A pre-pack a is a frying pan or the fire solution – on the one hand the new owners claim they are saving jobs, but on the other, businesses owed money by the old company are left with no way to reclaim their loss.

In many cases the businesses owed money are pension funds, which are the landlords of the boarded up shops appearing on the high streets.

The suppliers are not hit as badly because they are demanding cash upfront for new stock.

So far the recession is making the rich richer and the poor poorer, as ordinary folk worry over the future of their jobs, mortgages and families, those with ready cash are making a killing.

The bottom line is do pre-pack investors receive all praise as white knights risking their cash to save jobs, or is that really just spin on opportunists chancing their arms to make even more cash on the back of someone else’s loss?

Perhaps the credit crunch is an eye-opener for everyone as at last the veil of secrecy draped over business deals and money markets is lifted to reveal the greed and hypocrisy of how we all got in to this mess in the first place.