MILLIONS of pounds worth of gift vouchers have become worthless on the high street after North-East voucher supplier Choice went into administration.

Thousands of stores across the UK have stopped accepting Choice Gift Vouchers and customers are being told to go back to the suppliers for a refund or exchange.

Choice, based in Gateshead, was forced into administration on Wednesday, owing between £55m and £60m to high street retailers, including Argos, HMV and Woolworths.

The company distributes its own gift vouchers and customers can choose where to spend them. It does not operate the retailers' vouchers.

Ian Stokoe, of administrators PricewaterhouseCoopers (PwC), said: "Choice hit problems after one firm that distributed its vouchers failed to pay its bills last month."

He said Choice, which employs eight people, was more than £10m short of the cash it needed to repay retailers for the vouchers spent in their stores.

He said that unlike other voucher suppliers, Choice does not insist on being paid by distributors, such as hamper retailers and mail-order companies, on the point of issue. Instead, it invoices companies after the voucher has been spent in the high street.

"Choice has gone bust because one of its customers said they didn't have the ability to pay a substantial sum of money," he said.

"Choice does not have any significant cash reserve so, unless they can collect the debt from that customer, they cannot pay all the money back to the retailers that are owed money.

"Because there is no guarantee that money would come, the directors decided the company should be put into administration and consequently, all retailers will not accept the vouchers anymore."

Retailers that did accept vouchers, which include HMV, Bhs and Comet, are providing the administrators with their claims.

They are likely to receive a payout worth about 60p for every £1 that they are owed.

Mr Stokoe said Choice took a very small percentage of the turnover costs and acts as "a service provider rather than a moneymaker".

PwC is looking for a buyer and said it had received one approach.

Voucher Express is one of many distributors of Choice vouchers.

Managing director Andrew Johnson said: "In our case, we have been busy contacting all our customers who have bought the vouchers through us, so that they can return them and get another voucher."

Over the Christmas period, about £75m worth of Choice vouchers were spent in more than 17,000 stores nationwide.

Customers holding Choice vouchers are advised to return them to the place of purchase for reimbursement or contact 0191-478 5994.