Deep flaw in the law puts banks ahead of the staff
THE sale of House of Fraser to Mike Ashley has once again seen a billionaire and bankers allowed to cash in on the collapse of a failing company while ordinary savers pay the price.
By letting the chain fall into administration, City financiers have ensured they would be the first people to be paid back any debts owed.
And it has allowed Mr Ashley, who also runs Sports Direct and owned 11 per cent of House of Fraser, the chance to pick the carcass for the bits he wanted.
He’s snaffled the shops – which include some of the most historic buildings in city centres across Britain – the stock and the historic name for just £90million.
Four years ago House of Fraser was worth £480million.
But he’s washed his hands of the crippling debts that were choking the firm and the pension scheme that guaranteed the life savings of 10,000 workers.
These were employees who spent their lives toiling at the counters and on the shop floors to keep the business afloat.
Their savings are now being dumped into the lifeboat Pension Protection Fund, where they’re likely to see their retirement incomes chopped by 10 per cent.
The bankers, in whose hands the future of House of Fraser was left, rejected a bid for the solvent company from retail tycoon Philip Day, probably because it would have left savers ahead of them in the list of creditors, leaving them unable to take their pound of flesh.
This is a deep flaw in company
law that puts workers and the firm’s obligations below the needs of bankers.
The Pension Protection Fund, which is funded by a levy on savers, should be a last resort for when companies go completely under.
But it is being abused and used as a safety net for opportunistic billionaires hoping to snap up the assets of a struggling firm.
If they want the assets, the pensions should be part of the package.
Like a phoenix rising from the ashes of the old burned out business, Mr Ashley has promised to turn House of Fraser into the Harrods of the High Street.
In the process though he’s burned the very workers who helped to keep it alive.