It had been rumoured for a while but finally, this week, it was announced that the retail multinational Arcadia would enter administration in what has been called “the worst single corporate failure of the Covid-19 crisis to date.”
The retail kingdom had boasted 444 sites across the UK, with more overseas, including brands like Topman, Burton and Dorothy Perkins. As of this week it has over 9,000 staff on furlough, while around 13,000 retail jobs are currently thought to hang in the balance. Arcadia chief executive Ian Grabiner said the decision made for an “incredibly sad day”.
“The impact of the Covid-19 pandemic, including the forced closure of our stores for prolonged periods, has severely impacted on trading across all of our brands,” he said. “Our priority has been to protect jobs and preserve the financial stability of the group, in the hope that we could ride out the pandemic and come out fighting on the other side…Ultimately, however, in the face of the most difficult trading conditions we have ever experienced, the obstacles we encountered were far too severe.”
The news comes after Arcadia reportedly rejected a £50 million loan offer from Frasers Group, which is run by Arcadia owner Phillip Green’s arch-rival Mike Ashley. “Frasers Group were not given any reasons for the rejection (of the loan) nor did Frasers Group have any engagement from Arcadia before the loan was declined,” Ashley’s company said on Monday.
The collapse has also raised questions over the company’s pension scheme, with calls for Green to stump up the required £350 million owed to employees. As of yet, there has been no comment on Green’s part.
The impact of Covid-19 on the retail sector is undeniable. But was the collapse of Arcadia driven by something deeper? With Green’s reputation taking a nosedive in recent years and the economy turning away from the high street to online retailers, is Covid simply the last nail in Arcadia’s coffin?
Arcadia isn’t the first UK high street staple to encounter Covid complications. Debenhams, Edinburgh Woollen Mill Group, Warehouse and Oasis have all slid into insolvency since March. Despite this, with a nation out of work and counting pennies, Arcadia was not able to hold on to its share of retail traffic.
Founded in 2002, the retail giant had already seen a significant slip in its position thanks to the general drift away from the high street to online retailers. At its height, Arcadia had over 2,500 outlets in the UK alone, but less than a fifth of that at the time of its administration. In its most recent accounts (up to 1 September 2018) the group reported a pre-tax loss of £93.4 million with sales down 4.5% over the previous year. In September 2017 it had boasted a profit of £164.6 million. Coming hot on the heels of its 2017-2018 losses was the news that the group had recorded a £300 million deficit in its pension fund. Meanwhile, the Green family had awarded itself £1.2 billion in dividends since 2005.
This latest development comes on the back of the BHS scandal of 2015. Having bought the company for £200 million in 2000, the Green family then sold it for £1 in 2015 when it became clear it was on its last legs. At the time, BHS’s pension deficit was a staggering £571 million, a deficit attributed to Phillip Green having syphoned off dividends to his family and friend Richard Caring. Investigating the BHS scandal at the time, former Labour MP Frank Field criticised Green and family for handing out huge dividends “when things were going well”, and making employees pay when they were not.
Phillip Green, born in 1952 to a successful property developer, has had more than his fair share of personal controversies. Having made his way in discount retailers before purchasing Arcadia with his wife Tina in 2002, the conglomerate went from strength to strength, amassing Green a reported personal fortune of £930 million. He has become known for throwing lavish birthday parties for himself and his family. Reportedly, his wife bought him a solid gold Monopoly board for his 55th birthday, featuring his own acquisitions.
Green is also known for multiple accusations of tax avoidance, infringements on workers’ rights – including the use of sweatshops – an anti-Irish outburst, and sexual harassment and bullying allegations, including a charge of four counts of misdemeanour assault after a pilates instructor accused him of frequently touching her inappropriately.
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