Paperchase became the first retail casualty of England's third lockdown on Tuesday when the stationery chain said it was on the brink of administration.
The retailer, which has 173 stores and concessions in the UK and 15 franchise outlets in the UAE, filed a notice to appoint administrators, providing 10 days of breathing space for creditors to secure a rescue plan. Accountancy firm PwC will handle the process.
"The cumulative effects of lockdown one, lockdown two – at the start of the Christmas shopping period – and now the current restrictions have put unbearable strain on retail businesses across the country,” Paperchase said.
As a non-essential retailer, Paperchase, which employs 1,500 staff, was forced to close in the first lockdown in March at last year, as well as the second lockdown in November when it usually makes a high proportion of annual sales in the run-up to Christmas.
It is understood the 15 outlets in the UAE are unlikely to be affected as they are franchised by Dubai-based Al Maya Group. Set up by businessman L K Pagarani in 1982, the company has five Paperchase stores in Abu Dhabi, nine in Dubai and one in Sharjah.
Paperchase is the latest victim of the UK's ailing retail sector, which has been battered by the lockdowns that forced non-essential shops to close, with the latest closure proving the tipping point for the company.
British retailer Debenhams said it would close at the start of last month, putting 12,000 jobs at risk after failing to find a buyer in last-ditch efforts to rescue the brand. The news came a day after retail tycoon Philip Green's Arcadia fashion group entered administration, threatening about 13,000 jobs.
Alshaya Group, the Middle East franchise owner of Debenhams, said its outlets across the region would continue operating despite the collapse of the department store chain in the UK.
The Kuwaiti family-owned business, which has 26 Debenhams stores across the Middle East, including nine in Saudi Arabia and six in the UAE, said business would be unaffected by Debenhams failing to find a buyer.
David Macadam, chief executive of the Middle East Council of Shopping Centres, said last month that the effect to franchise holders of brands, such as Debenhams, going under occurs much later and “to a far less extent in the Mena region”.
"It takes time to filter through the system to reach this end of the world and in the meantime, it's pretty much business as usual, as long as the inventory is there," he told The National.
Paperchase said the constant cycle of lockdowns was too much for the business, as 40 per cent of the company’s sales are derived from trade in November and December.
UK retail sales fell 3.8 per cent in November, according to the Office for National Statistics, and while Paperchase said its online sales performed well during the second lockdown, it was unable to mitigate the effects of store closures.
“Paperchase is not immune despite our strong online trading. Out of lockdown we’ve traded well, but as the country faces further restrictions for some months to come, we have to find a sustainable future,” the company said.
“We are working hard to find that solution and this [notice to appoint administrators] is a necessary part of this work. This is not the situation we wanted to be in."
The company went through an insolvency process, known as a Company Voluntary Arrangement, in March to help cut costs.