High street fashion chain Edinburgh Woollen Mill (EWM) is on the brink of insolvency putting 24,000 jobs at risk.
The company which owns brands Peacocks and Jaeger has filed a notice to appoint administrators to look for potential buyers to shore up the struggling business.
EWM told its staff on Friday that the company had been hit by national and local coronavirus lockdowns.
All stores will continue trading and further details will be announced in due course, the company said, but significant changes are expected.
Insolvency specialists from FRP will spend 10 days carrying out an urgent review ahead of further action.
“Like every retailer, we have found the past seven months extremely difficult,” EWM chief executive, Steve Simpson said. He thanked staff for their “amazing efforts during this time” and also EMW customers who have “remained so loyal and committed to our brands.”
Previously, EWM was hit by allegations that the retailer and several rivals failed to pay some Bangladeshi suppliers during lockdown in an attempt to cut costs for clothes they were unlikely to sell. The company has denied the accusations.
“This situation has grown worse in recent weeks as we have had to deal with a series of false rumours about our payments and trading which have impacted our credit insurance,” Simpson said of the allegations.
He added: “Traditionally, EWM has always traded with strong cash reserves and a conservative balance sheet, but these stories, the reduction in credit insurance, against the backdrop of the lockdown and now this second wave of COVID-19, and all the local lockdowns, have made normal trading impossible.
“As directors we have a duty to the business, our staff, our customers and our creditors to find the very best solution in this brutal environment.
“So we have applied to court today for a short breathing space to assess our options before moving to appoint administrators.
“Through this process I hope and believe we will be able to secure the best future for our businesses, but there will inevitably be significant cuts and closures as we work our way through this.”
The group, which is based in Langholm, Scotland, was founded in 1947 and is owned by businessman Philip Day. The high street billionaire’s empire also includes Austin Reed, Jacques Vert and Jane Norman.
Responding to the news, shadow minister for business and consumers, Lucy Powell, said: "Yet another mass redundancy announcement underlines once again that our high streets are hanging by a thread.
"We cannot be numb to news like this despite its frequency. It means tens of thousands of people will now be very worried about their future.
"The government's sink or swim approach to businesses and jobs risks many more people joining them."
Despite seeing a rise in sales in July, Britain has seen a wave of mass job losses on high streets in recent months, and the country officially entered recession. Social distancing, uncertainty and wider economic upheaval continue to hammer firms in many sectors.
The announcement comes just hours before chancellor Rishi Sunak is expected to unveil new plans for protecting jobs and businesses hit by a rise in COVID-19 cases and new measures.
Sunak is set to announce new support measures for the economy on Friday, ahead of an expected increase in restrictions to cope with the second wave of COVID-19 infections sweeping Britain.
“The chancellor will be setting out the next stage of the Job Support scheme later today that will protect jobs and provide a safety net for those businesses that may have to close in the coming weeks and months,” a Treasury spokesperson said.
WATCH: What is the new job support scheme?