• Thu. Dec 5th, 2024

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R3 North East chair Chris FergusonR3 North East chair Chris Ferguson

North East shoppers should be bearing the continuing struggles of the UK retail sector in mind if they’re thinking about buying gift cards either as presents or for themselves.

Chris Ferguson, North East chair of insolvency and restructuring trade body R3, is advising shoppers across the region to make sure they understand the potential risks involved with buying gift cards and the fact that they could lose their money if a retailer goes out of business.

A number of well-known High Street names that have gone into administration or liquidation over recent years have been unable to honour gift cards that were been bought before their insolvency process began, with shoppers losing their money as a result.

Other cases have seen insolvent firms unable to honour gift cards after a given point in their insolvency process, while the wider retail sector is continuing to face severe trading difficulties.

Chris Ferguson, who is a director and head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, says: “While gift cards are very convenient and easily bought both in stores and online, it is vital that consumers also understand how they can be affected if the retailer that offers them enters an insolvency process.

“It is understandably frustrating when a retailer won’t accept gift cards during an insolvency process, but the insolvency practitioners in charge of the process are obliged to look after all creditors’ interests according to a strict order of priority set out in law, and unfortunately customers are just one of many.”

The Gift Card & Voucher Association, which represents more than 90 of key players in the UK gift card and stored value solutions market, estimates it is now worth over £7 billion annually, with recent research showing that 54.1% of UK adults had received at least one gift card in the last year.

Chris Ferguson continues: “Customers with gift cards or vouchers from any retailer which enters into an insolvency procedure and is either continuing to trade, or has gone through a pre-pack administration, must check with store staff to see whether they can still redeem them.

“If this is possible, it’s generally a good idea to spend them sooner rather than later, especially as your local store may be earmarked for closure or the situation across the whole organisation may change quickly.

“If a retailer has been sold as part of a pre-pack administration, where a company enters administration and is immediately sold to another buyer, then the decision of whether or not gift cards and vouchers issued prior to the administration will still be honoured is up to the new owner.

“While the name above the door will usually stay the same when a major retailer goes through the pre-pack process, it is a new and distinct legal entity and has no obligation to allow gift cards sold by its former incarnation to be used.

“With gift cards likely to be high on Christmas shopping lists in the near future, North East shoppers need to be aware of the risks of buying them ahead of time before any problems arise at the till.”