Queen's tailor hangs by a thread while furniture kingpin's future looks rickety

LONDON BRIEFING:Problems of Queen's dressmaker are being replicated by retailers throughout the country

AMID THE mayhem of the global meltdown, dealers did a double-take at one headline as it appeared on the financial wires last week: "Queen's dressmaker on the brink of collapse".

It briefly conjured up visions of an elegant, elderly Savile Row couturier being driven to the brink by the escalating market crisis. In many ways, that's exactly what it was - although Sir Hardy Amies, the Queen's official dressmaker for almost 50 years, died in 2003 aged 93, the company that bears his name lived on without him.

Not for much longer, however. The Hardy Amies business is teetering on the brink of bankruptcy after failing to secure funding from its 49 per cent shareholder, the Icelandic investment firm Arev Brands. Hardy Amies shares have been suspended as the company desperately tries to sort out its cashflow problems, but administrators are poised to move in.

Hardy Amies trades from just six outlets across the UK, including its flagship store at 14 Savile Row, which opened in 1946. But its problems are replicated by retailers, large and small, on high streets throughout the country.

The parlous state of Britain's retail sector was underlined yesterday as it emerged that up to 100 MFI stores could close within days, despite the furniture retailer's dramatic last-minute escape from collapse at the weekend.

The company, Britain's largest furniture retailer, was brought back from the brink late on Sunday evening, when its management team, led by Gary Favell, clinched a buy-out deal.

The funds came from Merchant Equity Partners (MEP), the private equity firm that bought the business for £1 two years ago - in effect, MEP paid the management to take the business off its hands.

The bulk of the cash, thought to be about £25 million, went straight to pay the quarterly rent on MFI stores, which fell due on Monday.

Now, however, Favell has told landlords that as many as half the MFI stores will be put into administration unless they agree to grant the struggling retail chain a three- month rent-holiday.

This would see the business through until the next "quarter day" - when rents are due - which falls on Christmas Eve.

The stakes are high. MFI employs just over 3,000 people and closure of half the chain would lead to heavy job losses.

Without the rent holiday, the chances of the business surviving look slim, particularly as it makes a huge proportion of its profits in the January sales, which is when most people buy new kitchens, rather than the run-up to Christmas.

MFI may survive - and the management team has assured customers that it's "business as usual". But there is no doubt that there will be a rash of retail failures in the coming months as consumers cut back even further on spending. Some will cling on until Christmas, but others will not make it that far.

Reflecting the malaise in the housing market, the furniture and households goods sector looks particularly vulnerable. Several smaller chains have buckled in the past week alone, including Roseby's, the home furnishings retailer which had 280 stores, an annual turnover of £100 million and employed 2,000 people. Administrators have been called in and are attempting to sell the business, but buyers will not be easy to find.

The most recent casualty is the inappropriately-named Joy, a 28-store clothing and homewares chain which is also now in the hands of administrators.

Despite a celebrity clientele including actress Keira Knightley and Sienna Miller, Joy is thought to have been unable to meet its rent bill.

Even the mighty Tesco is feeling the impact of the economic slowdown. Although it satisfied the market yesterday with news of a 10 per cent increase in first half profits, Britain's biggest retailer admitted that it has been losing market share to discount chains such as Aldi and Lidl. A recent report from Mintel showed that 40 per cent of shoppers have switched to cheaper brands to conserve cash, and Tesco has responded by launching a new cut-price range to combat the discounters and take advantage of the growing trend to trade down.

There was also a sharp slowdown in the group's non-food sales, which have been one of the engines of its stellar growth in recent years. Sales were still ahead, but the rate of growth halved from 8 per cent to 4 per cent over the first half.

Still, Tesco's figures will look far better than that other high street bellwether, Marks Spencer, which is due to report tomorrow.

Analysts fear sales at MS could be down by as much as 7 per cent and chief executive Sir Stuart Rose, triumphant six months ago when the group breached the £1 billion profit barrier for the first time in a decade, may have a little difficulty maintaining his usual cheerful disposition.

• Fiona Walsh writes for the Guardiannewspaper in London