Sir Philip Green’s retail empire set to collapse in days, risking 15,000 jobs
Sir Philip Green’s retail empire is set to collapse within days, putting around 15,000 jobs at risk.
Arcadia, which runs t he Topshop, Dorothy Perkins and Burton brands , is expected to appoint administrators for Deloitte in the coming days.
It was reported on Friday that Arcadia could tumble into administration as soon as Monday.
It is understood that Green is considering a process known as a light- touch trading administration, in which management would retain control of the day- to- day running of the business while administrators seek buyers for all or parts of the company.
The retail group had been in emergency talks with lenders in a bid to secure a £ 30 million loan to help shore up its finances.
I f t he i nsolvency i s c onfirmed, it is expected to trigger a scramble among creditors to get control of company assets.
It is the latest retailer to have been hammered by the closure of stores in the face of coronavirus, with rivals including Debenhams, Edinburgh Woollen Mill Group and Oasis Warehouse all sliding i nto insolvency since the pandemic struck in March.
The group has more than
500 retail stores across the UK, with the majority of these currently shut as a result of England’s second national lockdown, which will end next week.
The company said it is “working on a number of contingency options,” amid reports that Deloitte might soon be appointed as administrators.
A spokesperson for the company said: “We are aware of the recent media speculation surrounding the future of Arcadia. The f orced cl osure of our stores for sustained periods as a result of the Covid- 19 pandemic has had a material impact on trading across our businesses.
“As a r esult, t he Arcadia boards have been working on a number of contingency options to secure the future of the group’s brands.
“The brands continue t o trade and our stores will be opening again in England and ROI as soon as the Govern
ment Covid- 19 restrictions are lifted next week.”
Dave Gill, National Officer at retail union Usdaw, said: “This is a devastating blow for workers at Arcadia and could not have come at a worse time, just before Christmas.
“We are seeking urgent meetings with management and we urge them to end their longstanding anti- union stance and engage with us.
“In the meantime we are providing our members with the support and advice they need at this difficult time.”
In its most recent accounts f o r t he ye a r t o 1 S e p t e mber 2018, Arcadia reported a £ 93.4m pre- tax loss compared with a £ 164.6m profit in the previous 12 months.
It also said sales fell 4.5 per cent to £ 1.8 billio n.
The possible collapse of the group has also raised concern around the companys pension scheme, with analysts suggesting it would leave a pension deficit estimated to be as much as £ 350m . On administration, the group’s schemes would fall under the auspices of the industry- funded pensions lifeboat, which could cut pay- outs for staff members by 10 per cent when they retire.
Last year, Tina Green, 71, the wife of Sir Philip and ultimate owner of Arcadia, pledged to pay an extra £ 100m into the funds over three years and signed over rights to property worth £ 210m. However, the fall in the value of retail property means a sale of those assets is unlikely to fill the pension black hole.
Like all fashion chains Arcadia has suffered heavily from a slowdown in spending on fashion as pubs, clubs and many workplaces have been closed for much of the year. Groups that are heavily reliant on their stores have suffered further as sales lost during the high street lockdowns have not been made up online.
The enormous reach of Arcadia means its collapse would h ave f a r - r e a c h i n g c o n s e - quences.
"Arcadia would be the biggest British corporate collapse of the pandemic if it does enter voluntary liquidation," said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, told the BBC. "It would hollow out huge swathes of the High Street, if its huge footprint of stores were forced to close."
And even after a series of scandals, this could be the toughest challenge yet faced by Sir Philip Green.
In the early 2000s Sir Philip bought department store BHS in a deal worth £ 200 million. He subsequently bought Arcadia in 2002 through his familyrun business Taveta, of which his wife Tina, based in Monaco, is the director.
In 2005 Sir Philip paid himself £ 1.2b n in dividends from Arcadia, more than four times the company's pre- tax profit. The money went to Tina in Monaco, meaning it was not taxed in the UK.
He initially turned around the loss- making BHS business, gaining plaudits in the process. And Arcadia went from strength to strength.
But, over t i me, a l ack of i nve s t ment a n d a f a i l u r e t o capitalise on t he growing online market meant the brands failed to keep up with the changing face of retail.
T h e 2 0 0 8 g l o b a l r e c e s - sion would be the start of his empire's undoing, with BHS sold in 2015 by Sir Philip to serial bankrupt Dominic Chappell for £ 1.
Just 11 months later the company finally collapsed, costing 11,000 people their jobs, and earlier this month Chappell was sentenced to six years in jail for tax evasion during his time running BHS.