Cantillon: Examinership needs to be examined all over again
Yet another stalwart of Irish consumer retailing keeled over yesterday, as WB Peat & Company – known colloquially as Peats of Parnell Street – announced it would cease trading with immediate effect. But what does this say about its “rescue plan”, formulated a little over 12 months ago at a cost of almost €170,000 and approved via an examinership process by a High Court judge?
In terms of its business model, Peats, one of the best-known electronics retailers in the country, was still on analogue in a world long since gone digital. Its customers retained remarkable affection for the brand, but it was facing the proverbial perfect storm: consumers were migrating online and it wasn’t; it was reliant on discretionary spending and, as an independent retailer, it didn’t have the luxury of a parent-group guarantee to help it trade its way out of trouble.
Last year’s rescue plan envisaged the company breaking even this year with two Dublin stores. How feasible was that projection? The sheer duration of the consumer spending famine that kyboshed Peats has shocked the industry. But was anybody predicting any respite 12 months ago when the plan was being assessed by the High Court? The family that owns the company has lost hundreds of thousands of euro since, in an utterly fruitless attempt to keep it afloat.
Examinership was introduced to Ireland more than 20 years ago, originally to help save Larry Goodman’s beef processing empire. It has since been successfully used by some of the biggest firms in the state, such as Eircom, to formulate survival plans. Bigger retailers such as Homebase and B&Q, who can cope with the expensive examinership fees, also appear to be using the process almost routinely to cram down their boom-time rents.
It has become obvious, however, that the entire examinership system needs an overhaul for smaller firms. The one-size-fits-all ethos of the system is defunct. The current system is too expensive, and its outcomes too unpredictable, to be considered fit for purpose for the SME sector.
Ryanair and the watchdog
It seems almost certain that the UK Competition Commission will this week order Ryanair to sell all or most of its 29.8 per cent stake in rival Aer Lingus.
The watchdog signalled in May that it was likely to seek this remedy in a preliminary finding from an 11-month investigation into how the stake affects competition between the pair in routes between Ireland and Britain.
It concluded that Ryanair’s presence on the Aer Lingus share register commercially weakened the smaller carrier and could put others off bidding for it. Ryanair responded by pointing at the high level of competition on the Irish-British routes.
It then said that it would happily sell its shares to any other European airline that manages to get 50 per cent acceptances – not including its stake – for an offer for Aer Lingus.
Chief executive Michael O’Leary has argued that there are no real grounds for the commission’s finding and says his company will appeal it to every possible legal forum.
The appeal will join the 20 or so legal actions and investigations involving Ryanair, various European airports, national governments and the EU authorities that are mainly focused on state aid of one sort and another.