BHS rescue bid fails with loss of 11,000 jobs

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BHS department stores are to disappear from British high streets after almost 90 years, with 11,000 workers losing their job.

In the biggest failure in the retail industry since the demise of Woolworths in 2008, the administrators to BHS will wind down the business and close its 163 shops after a rescue deal fell apart. The liquidation of BHS will crank up the pressure on Sir Philip Green and Dominic Chappell, the former owners of the retailer, who have left BHS with a £571m pension deficit.

Green and other investors collected more than £580m in dividends, rent and interest payments during his ownership of BHS, while Chappell’s consortium Retail Acquisitions was paid millions in salaries and management fees. Anna Soubry, the business minister, said the government will take any misconduct in the demise of BHS “extremely seriously”. Union leaders called the news a devastating blow for staff.

Speaking outside BHS’s headquarters in Marylebone, north London, staff expressed their anger at the former owners. One male worker, who declined to give his name, said: “It’s our previous owners that anger is directed at. They took money out of the business that wasn’t there to be taken. Whatever Mr Sir says, to walk away from a company with a big pension deficit like that is disgusting. It’s not moral.”

Another employee said: “Some people have been in this building for 45 years and they are not people who can just walk onto yachts. These are people who have mortgages and shop at Asda.”

MPs will quiz Green and Chappell within the next two weeks about their roles in the scandal. Frank Field, chair of the work and pensions committee, said he was very disturbed by the collapse of the retailer. He dismissed the administrators’ analysis that BHS had been a victim of seismic shifts on the high street. “There was nothing inevitable about its collapse at all. £1.3bn was taken out of this company,” he said.

“This is an unbelievable slap in the face for those on the Tory benches who believe in righteous capitalism. It has proved hollow in this case. We have a system of capitalism in this country where huge sums could be taken out of BHS and there was no moral guidance or compass on the owners. They had all the privileges of ownership without the feeling of responsibility of it.”

A spokesman for Green said he was “saddened and disappointed by the news”, adding: “He had hoped the business could be saved as a going concern.” Chappell did not respond to requests for comment.

Staff at BHS’s head office in London were being made redundant on Thursday, while the company’s remaining 163 shops will close over the next few weeks as they run out of stock. The BHS brand will disappear unless another business buys the name.

Shoppers at BHS’s flagship shop on Oxford Street in London said the brand had struggled to stand out amid fierce competition on the high street. Carol, who only wanted to give her first name, said: “They didn’t market it properly. In the past it was known for it’s lighting department. It’s just a toxic company. I don’t know why the government let Philip Green sell it for a pound. What company is sold for a pound? You need to question that.”

Duff & Phelps, the administrator, said a rescue deal for BHS could not be agreed because of the significant amount of cash needed to rebuild the business, despite “multiple offers” being received for the chain. The administrators had been locked in talks about a rescue deal for the last two weeks with a Portuguese-backed consortium led by Greg Tufnell, the brother of former England cricketer Phil, and a former managing director of Mothercare and Burton. It is understood the consortium were told they needed to show they had £100m to rebuild BHS, but could not provide proof of their funds.

The collapse of BHS, which was founded in 1928 in Brixton, south London, is likely to lead to the loss of 8,000 staff jobs, as well as a further 3,000 contractors who worked in the stores. These contractors include staff working in BHS cafes for Compass, the catering group, and Arcadia staff working in Dorothy Perkins and Wallis concessions within BHS. The administrator will now look to sell off BHS’s assets, including individual stores and the brand name. It has brought in Hilco, the restructuring firm and owner of HMV, to help wind down BHS.

Philip Duffy, managing director of Duff & Phelps, said: “The British high street is changing and in these turbulent times for retailers, BHS has fallen as another victim of the seismic shifts we are seeing. The tireless work and goodwill of the existing management team and employees of BHS with the support of my team were not enough to change the fortunes of the company.”

A spokesman for BHS said its management team were “crushed” by the news and blamed the company’s demise on Chappell’s failure to deliver up to £100m of new funding that he had promised. “It was left in too much of a weakened state,” he said.

Green owned the retailer for 15 years until he sold it for £1 to Retail Acquisitions, a collection of little-known accountants and lawyers led by Chappell, who has been declared bankrupt three times. As well as the investigation by MPs into the circumstances surrounding BHS, the government has fast-tracked an Insolvency Service probe.

Soubry said: “Today’s announcement that the administrators have been unable to find a buyer for the business will be devastating news for all those who work at BHS and those in the supply chain. The government stands ready to support workers to find new jobs as quickly as possible.

“The business secretary has already announced an accelerated Insolvency Service investigation into the activity of former BHS directors. Any issues of misconduct will be taken extremely seriously.”

The Insolvency Service is working closely with the administrators. Sources close to BHS say that last month a court order was issued to Chappell ordering him to hand over his mobile phone and laptop.

David Gill, the national officer of Usdaw, the trade union for shopworkers, said there were very serious questions to be answered over the collapse of BHS and called on the government to reconsider Britain’s administration laws. At present the administrator must work to secure the best return for secured creditors, such as banks, rather than staff. He said: “The staff in BHS have been in a state of anxiety and uncertainty for over a year after the company was sold for one pound, went into administration and has now been put in liquidation.

“This news is a devastating blow for the staff and the shock waves will be felt on high streets throughout the country. There are some very serious questions that need to be answered, by former owners of the business, about how a company with decades of history and experience in retail has now come to this very sorry end.”

Arcadia is a secured creditor of BHS and could get about £35m back from the sale of any assets by the administrator. This £35m was originally earmarked for the company’s pension scheme, but it is unclear at present what Green’s plans are for the cash. The pension scheme is entering the Pension Protection Fund (PPF), which is funded by a levy on other pension schemes across the UK. This will protect workers pensions, but they are likely to suffer a 10% cut to their benefits.

The Pensions Regulator is investigating whether Green should be forced to make contributions to the pension scheme. A spokesperson for the regulator said: “We recognise that this is a particularly difficult time for BHS employees. Our anti-avoidance investigation continues and our chief executive has given a clear commitment that we will have made significant progress by the end of 2016.

“It’s important that we do not prejudice this complex case and are able to progress it quickly. We are therefore not making any further comment at this time.”

Powered by article was written by Graham Ruddick, Sarah Butler and Katie Allen, for The Guardian on Thursday 2nd June 2016 19.12 Europe/London © Guardian News and Media Limited 2010


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