MFI, Britain’s biggest furniture retailer, collapsed into administration last night for the second time in two months – putting more than 1,000 jobs at risk.

MCR, the administrator, will try to sell the business as a going concern, but in the meantime “closing down” sales will begin in all 111 of MFI’s remaining stores. It is thought unlikely that any buyer will come forward.

Some 26 stores will close immediately with the loss of about 260 jobs.

The move comes after a tense stand-off between MFI’s owners and the landlords of its stores, including Galiform. MFI had requested a three-month rent-free period from the landlords – who, at the beginning of October, gave the company only one month’s grace.

MFI said: “The administration follows the continuing pressure on the home market, which has accelerated in recent weeks with sales levels falling further behind prior year levels.

“The company has suffered from severe cashflow pressure as a result of credit insurance being withdrawn across the sector and the general market deterioration, which has led to the failure of certain key suppliers.”

It added that all customer orders would be either fulfilled or refunds made, adding that it had written to each of its customers about this.

The company said that its credit card merchant services provider was holding “a substantial sum” to pay any refunds falling due. It said that all customer issues would be dealt with centrally through a call centre and not in the stores.

Phil Duffy, of MCR, said: “While a decision has not been made as to an appropriate exit route and the future of the company, the administrators will be reviewing the possibility of a sale of some or all of the company’s stores.”

Mr Duffy added: “In the meantime, all outstanding employee wages have been paid up to date, and ongoing wages for retained staff will continue to be paid as an expense of the administration.”

MFI is the latest in a string of household and home furnishings companies to have collapsed this year. ScS Upholstery, the sofa maker, went into administration in July, before being rescued by Sun Capital, the private equity firm, and Rosebys, the textiles retailer, shut its last stores this month.

MFI was founded in 1964 in London by Noel Lister and Donald Searle. It took its name, Mullard Furniture Industries, from the maiden name of Mr Searle’s wife.

The business was taken over in 1985 by Asda, the supermarket chain, for £563 million, but was sold two years later for £715 million in what was then Europe’s biggest management buyout. It returned to the stock market in 1992 with a £669 million price tag.

MFI’s stores were sold for £1 in September 2006 to Merchant Equity Partners, a private equity firm founded by Henry Jackson, a City banker. It was confident of turning around the business and closed many of the firm’s underperforming stores. However, doubts arose over MEP’s future when, in August, Cerberus, the US hedge fund, sold its stake in the business to Hilco, the buyout specialist, and Goldman Sachs, the investment bank.

A month later, the business again changed hands for a nominal £1, as MEP sold it to a management team led by Gary Favell, the chief executive. Soon afterwards, Mr Favell put the business into administration but bought back only 106 of the original 192 stores. Galiform, which had guaranteed rent payments on 46 MFI stores, of which 26 were occupied by Mr Favell’s operation, said last night that it would be required to pay costs in relation to all the properties after MFI’s administration.

It added: “Galiform is saddened by these developments.

“As part of the sale of MFI Retail to MEP in September 2006, which involved around 200 MFI stores, Galiform provided substantial funding and operational support to the business, including cash payments totalling £65 million, the supply of products for the period to the end of 2007 and the provision of IT services until October 2008.” Galiform said that it had also kept responsibility for the pension entitlements of MFI employees at the time of the sale.

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