UK MPs have urged the government to protect Poundland and other high street retailers from what they described as predatory capitalism and asset-stripping. The chain’s future and the jobs of its 12,000 employees remain uncertain after it filed a notice of intention to appoint administrators at the High Court last Thursday.
Poundland’s board has appointed advisory firm AlixPartners to manage the process after its owner, US restructuring specialist Gordon Brothers, stopped providing funding. In a Commons urgent question on Tuesday, Labour MP Gareth Snell called on the government to signal that the treatment of the retailer would not be tolerated. Labour MP Antonia Bance also asked whether the government would review corporate governance and insolvency rules to improve protection for jobs and high streets.
Kate Dearden, the minister for the future of work, said government officials had spoken with Gordon Brothers on Monday night. She said she would meet Poundland’s management and shop workers’ union Usdaw on Wednesday, while Business Secretary Jonathan Reynolds was due to meet the owner again later in the week. The chair of the Commons business select committee, Liam Byrne, has also asked Gordon Brothers to answer questions next Wednesday.
Dearden said the government could not intervene in commercial negotiations or comment on individual offers. However, she said it was pressing Gordon Brothers to recognise its responsibilities to Poundland and its employees. The prime minister’s spokesperson said the situation was extremely worrying and questioned why the owner had not accepted an offer to keep the business running.
Gordon Brothers is understood to be in discussions with at least two potential buyers. One is Martin Property Group, whose offer of about £15 million is described as fully funded, although only half would be paid immediately. The owner is believed to consider that amount insufficient to repay a £30 million shareholder loan. A second proposal, from investment group Innovest, is believed to have only partial funding in place.
The prospect of avoiding widespread store closures and job losses is narrowing as suppliers hold back deliveries, affecting Poundland’s ability to trade. In a letter to the government, Gordon Brothers executive Mark Newton-Jones said the owner had provided £85 million in additional financing since acquiring the retailer for £1 last year and that the chain had returned to underlying profit. He also cited rising inflation, higher staffing costs and shoplifting as challenges, saying Poundland was not yet generating cash sustainably.
Green Party MP Hannah Spencer criticised private equity firms for loading high street brands with debt, while Conservative business spokesperson Bradley Thomas said the economic climate was hostile to British businesses. Poundland founder Steve Smith told the Guardian that employees could be out of work for years if the chain collapsed.
Sources: The Guardian Business.