Caffe Nero on brink of insolvency with coffee chain blaming second lockdown

Caffe Nero is on the brink of insolvency with the company blaming the second lockdown as it becomes the latest big High Street pandemic victim.

The UK's third largest coffee chain, founded in London 30 years ago, was placed into a Company Voluntary Arrangement on Thursday as it scrambles to get its finances in order.

It puts 6,000 jobs across 800 stores in jeopardy - though bosses hope any closures or staff losses will be minimal.

Chief Executive Gerry Ford, whose Paladin Partners took over the business in 1997, expanding it outside the capital and across the UK, said the company had no other choice. Boris Johnson announced the England-wide one-month lockdown on October 31, restricting hospitality providers to takeaways only.

With office workers largely being absent from town and city centres since March, coffee shops have seen a major portion of their customer base disappear.

In attempt to combat the changes, Nero offered a click and collect service and home delivery. Mr Ford, 62, a former Hewlett-Packard analyser, has called on accountants KPMG to advise on the CVA, a type of insolvency that allows firms to continue trading in the short-term.

The American-born entrepreneur hopes to renegotiate rent agreements to allow the franchise to re-emerge after the pandemic.

"With our dine-in facilities now closed for a second time, we have little option but to launch this CVA to safeguard the future of our business," Mr Ford told the Daily Mail.

He said the chain had been trading strongly before the pandemic but "like so many businesses in the hospitality sector, the pandemic has decimated trading".

The CEO said the company successfully negotiated the "financial challenges" following the initial nationwide lockdown, the but the latest one "made it imperative that we take further action".

He added the aim has always been "to continue to protect jobs".

Will Wright, head of regional restructuring at KPMG, described the coffee company as an "iconic brand" with a "terrifically loyal customer base". imilar insolvency steps have been used by the likes of Debenhams, Clarks, Clintons and Homebase.

Critics argue CVAs are often used to squirm out of debts and force landlords to drop rents.

Mr Ford originally led a small group of investors in the purchase of five central London shops with the name Caffe Nero from Ian Semp who established the name in 1990.