Intu has warned that a lot of credit breaches may take place in the coming months, as the coronavirus crisis continues to impact economies and initiate recessions (as in the cases of Japan and the United Kingdom) on a global scale.
The retail industry took another hit as the major shopping centre operator warned of debts going unpaid in the months to come, demonstrating that the risk of defaults and major closures in the coming months is significant.
As retailers have had a reduced income for the past two months, many are struggling to pay their rents, with companies such as Debenhams and Burger King having not paid rent since the beginning of the UK lockdown.
This, in combination with the lack of knowledge around when demand would return to the market, has kept Intu in a precarious position seeing as they were already in a significant amount of debt.
Intu may be in a position after the crisis where they need to sell on shopping centres or even simply close some down.
Intu’s situation also has serious repercussions for the wider retail sector. The fall in rental income will be seen by property owners across the sector, and as stores close more and more people will find themselves out of work.
That means less money going around and into the retail sector, which will only serve to do even more damage to the sector in the long run.
Retail is currently in a precarious position, and if it falls into trouble, there could be a vicious cycle.
The Near Future
In terms of your investments, it would be wise to stay out of retail for a while. That sector will be taking the biggest hit in the months following lockdown, and although some companies may thrive as they emerge from the current situation, picking and choosing the right companies will be a significant risk.
If you want a safe investment, sectors such as banking or even usual stable commodities may be a safer way to make modest gains in the coming months.