Calls for better deal for Arcadia pension holders

Workers at Arcadia – the embattled owner of Topshop – should not lose out because of Sir Philip Green’s “greed”, according to Labour’s Ed Miliband.

Sir Philip had a “moral duty” to make up the shortfall in the company’s pension schemes, the shadow business secretary told the Commons.

Some members face losing at least 10% of future pension payouts following Arcadia’s fall into administration.

Talks regarding an alternative avenue to protect some pensions have emerged.

Retail empire’s demise

Arcadia collapsed into administration on Monday, putting 13,000 jobs at risk.

The administration will give Arcadia breathing space from creditors, such as landlords for its shops or clothing suppliers, while a buyer is sought for all or parts of the company. 

The plight of those who have pension promises from Arcadia pension schemes is also uncertain.

It is likely the company’s pension schemes could go into the official rescue scheme, the Pension Protection Fund.

That would see long-serving staff, or previous employees, who hold defined benefit pensions losing at least 10% of what they were promised in pension payouts when they reach retirement.

A Topshop store
image captionTopshop, Burton and Dorothy Perkins are part of the Arcadia stable

Arcadia’s pension schemes have an estimated deficit of £350m – that is the difference between pension liabilities and the funds’ assets.

Mr Miliband told the Commons: “Philip Green owes the workers at Arcadia a moral duty. His family took a dividend worth £1.2bn from the company, the largest in UK history, more than three times the size of the pensions deficit.

“The workers at Arcadia should not pay the price of Philip Green’s greed. So will the minister now publicly call for him to make good any shortfall in the pensions scheme and will he ensure that the pensions regulator takes all possible steps to make sure this happens?”

Similar calls were made by the SNP. Its business spokesman Drew Hendry said: “[Workers] must be given all the help they can get to have all of their pension rights retained.”

There is no legal requirement for Sir Philip, who ran the company, or his wife Lady Green, who owns it, to fill the entire pension deficit. They have not commented on the pension situation.

Responding for the government, business minister Paul Scully said it was inappropriate to comment on individual cases.

“The independent pensions regulator has a range of powers to protect pensions schemes and it does work closely with those involved,” he added.

“The schemes where the employer goes insolvent, the Pension Protection Fund is there to protect the members. Anybody already in receipt of their pensions will continue to be paid and other members will receive at least Pension Protection Fund compensation levels.”

Money in a jar marked "pension"

The Pension Protection Fund (PPF) will go through the books and consider whether the Arcadia pension schemes could survive or be bought by a third party, if it thought that would provide better outcomes for pension scheme members.

It has emerged that one potentially interested party is the Pension SuperFund – a new business that pools pension funds in a bid to make them more efficient and bring better investment returns.

As first reported by Sky News, early-stage talks have been held on absorbing Arcadia pensions into the Pension SuperFund.

“Pension SuperFund can confirm that it is is contact with the trustees of the Arcadia pension funds. Any transaction would subject to their agreement, the Pension Regulator and/or PPF clearance, as the case may be,” said co-founder Edi Truell, a former adviser to Prime Minister Boris Johnson.

“Pension SuperFund is currently of the view that it can offer a safe and secure home to the 9,500 pension members in the Arcadia pension funds.”

Trustees for the funds said they were in contact with the PPF and the regulator to ensure members’ interests were protected.

Pension superfunds – of which the Pension SuperFund is one of the biggest in the UK – are a source of debate in pension industry circles.

Supporters say they offer a more secure long-term option for savers, because they can consolidate schemes and reap the benefits of investing on a larger scale. They may also be cheaper than a scheme being bought out by an insurance company.

However, critics point to the fact they are governed by a different set of regulations, while trade unions have expressed concern that workers will see their pension shift from their employer to a profit-seeking superfund.

Topshop owner Arcadia hires administrators

Topshop, Burton and Dorothy Perkins owner Arcadia has gone into administration, putting 13,000 jobs at risk.

The High Street giant has hired administrators from Deloitte after the pandemic “severely impacted” sales across the group.

No redundancies would be announced immediately, it said in a statement.

And Arcadia’s stores will continue to trade as Deloitte considers all options available to the group.

All orders made over the Black Friday weekend will also be honoured, the administrators added.

Sir Philip Green’s retail empire had failed to secure extra funding to pay its debts after sales slumped during the pandemic.

The group, which runs 444 stores in the UK and 22 overseas, said 9,294 employees are currently on furlough.

Ian Grabiner, the boss of Arcadia, said it marked an “incredibly sad” day for the group.

“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.

“Throughout this immensely challenging time 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.”

Matt Smith, joint administrator at Deloitte, said that it would be working with Arcadia management to assess all of the options available to the group’s brands, which also include Evans and Outfit.

He said Deloitte would rapidly seek expressions of interest and expected to identify one, or more, buyers to hopefully ensure the future of the businesses.

Fashion retailer Boohoo is seen as a potential buyer for some of Arcadia Group’s big name brands, such as Topshop. In the past it has bought struggling brands Oasis, Warehouse, Karen Millen and Coast.

Presentational grey line

What’s next for Sir Philip Green’s retail empire? 

Analysis box by Simon Jack, business editor

The prospects for the 13,000 workers look very challenging. There is a lot of industry chatter that online-only retailers might want to snap up the names that still have some consumer power – such as Topshop and Topman. 

But while the likes of Boohoo and Asos may want the brands, they will not want to take on a portfolio of physical stores – which is where most of the jobs are. Other brands like Wallis, Evans, Dorothy Perkins and Burton are not considered very relevant to a new generation of consumers. 

And what of Sir Philip? His gruff and combative style belies – or is perhaps explained by – the fact he is much more thin-skinned and sensitive than you might think. He will feel this failure personally – but that will be little comfort to the thousands of employees facing an uncertain future with Christmas round the corner and rising unemployment limiting their other job options. 

He is also very stubborn. That resistance to change, and insisting he knew best, was at the heart of Arcadia’s demise. It’s hard to see another act in what has been a career full of drama and controversy.

As many have said, at heart he was not really a retailer – he was a shrewd financier – a money man. The future of retail requires a very different skill-set.

Arcadia: ‘No last minute rescue’ for Topshop owner

Sir Philip Green’s retail empire could collapse within hours, as a senior source at Arcadia Group told the BBC they do not expect any last-minute rescue deal.

The company, which includes Topshop, Burton and Dorothy Perkins, is set to enter administration on Monday.

That would put 13,000 jobs at risk. 

There had been speculation that Mike Ashley’s Frasers Group was offering a £50m loan to Arcadia, but that was dismissed by the Arcadia source.

The company insider told the BBC’s business editor Simon Jack: “If this was about £50m we could find that in five minutes.” 

The source added: “This is obviously a sad day, we tried to save it a year ago when £200m was put into the business and the pension fund, but it’s impossible to operate now. 

“You don’t know when you’ll be open, you don’t know what stock to buy.” 

Arcadia’s brands once dominated High Street fashion, but its chains have been hit hard by store closures caused by the coronavirus pandemic, and the strength of online clothing retailers such as Boohoo and Asos. 

Presentational grey line
Analysis box by Simon Jack, business editor

This appears to be the end of the road for Sir Philip’s epic retail journey. One that has brought him riches, a knighthood and a government request to use his magic for public sector procurement.

It’s also brought him infamy, public condemnation and lawsuits settled controversially.

He has been branded the “unacceptable face of capitalism”.

But to some he is a skilled businessman and shrewd financier who created thousands of jobs. He can also be generous – providing financial assistance and long-term healthcare support for dozens of his employees.

Sir Philip doesn’t really do humble but I believe he does consider this administration a genuinely sad day for the employees, the business and his own legacy.

In the end he was operating in a world of modern retail that required a completely different skill set to the one he undoubtedly possessed.

Presentational grey line

Sir Philip is chairman of the Arcadia group, while his wife Cristina is the majority owner of its parent company Taveta Investments.

The couple are worth £930m, according to the Sunday Times Rich List.

Much of their wealth is derived from a £1.2bn dividend payment Sir Philip took from Arcadia and paid to his wife in 2005, two years after buying the business.

Since Lady Green is a resident in Monaco, it was paid to her tax-free.

The BBC understands Sir Philip is on his super-yacht Lionheart, which is docked in Monaco’s harbour. He has so far declined requests for an interview.

A BBC reporter in the principality said there was no sign of Sir Philip on deck, but crew members were busy cleaning the 90m-long vessel. 

superyacht in port
image captionSir Philip’s superyacht is docked in Monaco

Adding to the uncertainty facing the thousands of Arcadia staff is an estimated £350m hole in the company’s pension fund. 

The chair of the Work and Pensions Committee Stephen Timms has called on the Green family to plug the gap.

The Labour MP said: “This is a dreadful time for Arcadia staff to be worrying about their jobs and their pensions.”

“Whatever happens to the group, the Green family must make good the deficit in the Arcadia pension fund,” he said.‘No last minute rescue’ for Topshop owner Arcadia

Mr Timms said he would raise the matter with the Pensions Regulator on Monday.

Pensions consultant John Ralfe told the BBC that if Sir Philip chose to use his personal wealth to plug the hole in the Arcadia pension pot, that would ensure workers enrolled in the scheme receive their full pension. 

But Mr Ralfe said even if the retail magnate did not do that – or if he writes a cheque that is substantially less than £350m – Arcadia workers should still receive most of their pension entitlement through the Pension Protection Fund.

“The good news is the government has a lifeboat – the Pension Protection Fund – which is designed to make sure that people get compensation if their company goes bust,” he said.

“The compensation they get isn’t the full 100% of the pension promise they were expecting, but it’s not far short.”

Sir Philip Green and Lady Cristina Green
image captionSir Philip with his wife Lady Green are worth £930m, according to the Sunday Times Rich List

Mr Ralfe has previously said Sir Philip seemed to have “learnt his lesson” from the pension scandal involving BHS a few years ago.

Sir Philip sold the now-defunct department store to businessman Dominic Chappell in 2015 for £1, but a year later it collapsed. Around 11,000 people lost their jobs and the company was found to have a pension deficit of £571m.

Sir Philip later reached a deal with the Pensions Regulator – which accused him of selling BHS to avoid responsibility for the deficit – to inject £363m into the scheme. 

Commentators say the situation with Arcadia is very different and point to the fact that last year Lady Green agreed to pump £100m into Arcadia’s two pension schemes over three years.

Labour’s Stephen Timms said he will write a letter to the Pensions Regulator on Monday, “to underline the importance of securing the interests of [Arcadia Group’s] pension scheme members”.

The Pension Regulator and the Pension Protection Fund are understood to be staying closely informed of decisions affecting Arcadia Group.

A shop assistant adjusts a window display in Debenhams in front of a sale sign
image captionThere are fears Arcadia’s expected collapse could affect the future of Debenhams

Debenhams fears

The imminent collapse of Arcadia could also have implications for Debenhams, scuppering a potential sale of the department store chain to JD Sports. 

Arcadia is the biggest concession in Debenhams, accounting for around £75m of sales. 

JD Sports had been closing in on a rescue deal to buy Debenhams, which is currently in administration for the second time in a year. It has already cut some 6,500 jobs since May. 

Debenhams now has around 12,000 employees across 124 stores.

According to a source close to the JD Sports, the appointment of administrators to Arcadia would give the company “more to think about”. 

A final decision is expected within days.

Arcadia: Buyers to ‘pick over carcass’ of Topshop owner, says former boss

Breaking up the Arcadia retail empire, which includes Topshop, Burton and Dorothy Perkins, is “the only way” forward as it faces collapse, its former chief executive said.

Lord Rose, now chairman of Ocado, said “people will come and pick over the carcass” but not all the brands and infrastructure are likely to sell.

“If you aren’t relevant, you’re probably going to die,” he said.

Administrators could be appointed on Monday, putting 13,000 jobs at risk.

Lord Rose, who was chief executive of Arcadia until it was bought by retail tycoon Sir Philip Green in 2002, said the company had been “caught out” by the “relentless pace of change” in retail, which was only made worse by the Covid-19 crisis.

“Sadly what will happen is people will come and pick over the carcass,” he told BBC Radio 4’s Today programme, adding that there were “some tastier bits of the carcass” – such as Topshop – and “some less tasty bits of the carcass”.

“I just hope that someone will pick up some of the pieces, that some jobs are salvageable,” he said.

Arcadia would be the biggest British corporate collapse of the pandemic if it enters voluntary liquidation, analysts said. 

They said that if a large part of its 500 shops were forced to close, it would hollow out a huge swathe of the UK High Street.

But the shops are expected to continue to trade if administrators are called in, as buyers are sought for the company or its individual brands.

Lord Rose said he did not want to “demonise” Sir Philip, but said the controversial businessman had “not moved from an analogue world to a digital world fast enough”, blaming that on a likely lack of investment over 10 or 15 years.

“It’s a very, very tough place out there in the retail high street at the moment,” said Lord Rose, who also led Marks & Spencer for more than six years.

“There is very little room for manoeuvre, we’ve got a whole load of pressures in the sector and I’m afraid if you aren’t relevant, you’re probably going to die.”

BBC business editor Simon Jack said that while Topshop is deemed to have some value as a brand, insiders are less optimistic about the appeal of Wallis Evans, Dorothy Perkins and Burton to buyers.

Mike Ashley, founder of Sports Direct and owner of House of Fraser, has been suggested as one possible buyer for some of the brands, he said.

Any proceeds of a sale would be likely to end up in the Arcadia pension fund, which is hundreds of millions of pounds in deficit and would have a priority claim on the company’s assets.

Lord Rose said Arcadia teetering on the brink of collapse was jut one aspect of a “sector-wide malaise that’s been accelerated by the problems with Covid”.

There are forecasts of 20,000 shops closing and 250,000 retail jobs being lost, he said.

Menswear retailer Moss Bross launched a restructuring of its business on Friday and earlier this month fashion chains Peacocks and Jaeger were placed into administration after owner Edinburgh Woollen Mill Group failed to find a buyer. 

“If we don’t get back to normality we’re going to have more than 2.5m people unemployed, we’re going to have really difficult times on the high street, and that is a real, real problem,” Lord Rose said.

Casting a shadow

Retail consultant Kate Hardcastle said Arcadia’s brands had been “suffering for years through under-investment” while paying out large dividends.

She told the BBC that store closures could have a “knock-on effect” which “casts a shadow” on other high street retailers by reducing the overall footfall.

The future of the Arcadia brands is in developing an e-commerce presence “rather than just bricks-and-mortar stores”, Ms Hardcastle said.

Arcadia has acknowledged that the pandemic had “a material impact on trading across our businesses”.

Sir Philip had been in talks with potential lenders about borrowing £30m to help the business get through Christmas.

Those talks collapsed and the company said it was “working on a number of contingency options to secure the future of the group’s brands”.

But Arcadia had also been struggling against online competition from companies such as Asos, Boohoo and Pretty Little Thing, as well as high street brands such as Zara which have invested heavily in their digital business.

In its most recent accounts for the year to 1 September 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% to £1.8bn.

Topshop owner Arcadia on brink of collapse

Sir Philip Green’s retail empire Arcadia, which includes Topshop, Burton and Dorothy Perkins, is understood to be on the brink of collapse.

Sir Philip had been in talks with potential lenders about borrowing £30m to help the business through Christmas. 

However, these talks have failed and administrators could be appointed on Monday, putting 13,000 jobs at risk.

Arcadia said the pandemic “has had a material impact on trading across our businesses”.

“As a result, the Arcadia boards have been working on a number of contingency options to secure the future of the group’s brands. The brands continue to trade and our stores will be opening again in England and the Republic of Ireland as soon as the government Covid-19 restrictions are lifted next week.” 

If administrators are called in, the shops will continue to trade as buyers for the company – or more likely its more successful brands – are lined up. Arcadia currently has around 500 shops.

Without the £30m loan, doubts had been raised about whether Arcadia would be able to survive after trading had been badly hit by the coronavirus pandemic.

Non-essential retailers in England have been forced to close for four weeks until 2 December to contain the spread of Covid-19. 

As with many High Street chains that had to go into lockdown, Arcadia placed many of the group’s 15,000 workers on furlough.

Sir Philip Green and Lady Cristina Green
image captionSir Philip Green with his wife, Lady Cristina Green

Sir Philip is unlikely to buy back any of his brands if it does go into administration, which was first reported by Sky News.

Arcadia underwent restructuring last year through a company voluntary arrangement (CVA).

Under the deal, it agreed to shut 50 shops, secured a rent cut with landlords on property and struck a deal with the Pension Protection Fund to put money into the company’s pension schemes.