HMV’s fall into administration throws into stark relief the urgent need for business rates reform, its boss has said.
HMV executive chair Paul McGowan, who is also chair of owner Hilco, did not blame the rates regime entirely for the retailer’s collapse – changing markets hit performance.
But he said the weight of rates was a contributor and spotlighted how out of kilter the system is with retail reality.
McGowan told Retail Week: “There’s no reason not to raise the red flag and say the Government has been asleep for far too long.”
Retailers have argued for years that punitive levels of business rates on bricks-and-mortar shops are undermining them.
So far successive governments have ignored their warnings, although the issue will be considered again in the new year by the Treasury Select Committee.
McGowan said that while HMV’s sales had fallen by almost 25%, its rates bill was only 7% less. “What chance have you got when rates are stubbornly standing still?” he argued.
Chances of rescue
He also said that any rescue of HMV would likely depend upon the attitude of the big entertainment groups which are its main suppliers, and rely on its position in the UK physical entertainment market.
He said: “There are seven or eight big companies whose UK business depends a lot on HMV. The supermarkets are cutting [entertainment] space and Amazon squeezes margins. It’s a question of what the value is of the business to them.”
His views on the importance of HMV to major music and entertainment businesses was echoed by music journalist Pete Paphides.
He tweeted: “Given what a colossal stake Universal has in the entertainment industry, I’m surprised it has shown no apparent interest in taking over HMV…
“Statistically there’s a fair chance that any CD or LP you buy in a HMV will be a Universal product – and most of these will be impulse buys that would never have happened through browsing online.
“And even planned purchases – why not have a place where people can buy them without forcing them to go to Amazon?
“In buying out HMV, Universal would be, at the very least, ring-fencing their place in the market.”
Separately, The Sunday Times reported that Hilco took out almost £50m in fees during its five-year ownership of HMV.
Hilco responded that it was HMV’s biggest creditor, having lent £56.6m in working capital and another £4.5m in the last few months and it was “highly unlikely to recover those amounts in full”.
HMV has paid £40m a year in wages during its ownership period.
It is understood that a variety of parties are running the slide-rule over HMV. It is possible that Hilco itself could buy the business back.