Gordon Brothers releases £10m to Poundland as 12,000 store jobs remain at risk

Barry Williams told MPs Poundland made an £18.1m operating profit

Poundland received a £10m cash release from its US owner, Gordon Brothers, on Tuesday, according to a Guardian opinion column by Guardian columnist Polly Toynbee published on 12 November. The payment does not cover the £50m she said the owners had withheld for new stock and wages, but it prevented an instant collapse of the 600-store chain.

Gordon Brothers, which bought Poundland for a symbolic £1 last year and specialises in buying and “restructuring” distressed companies, extended the deadline by 10 working days before putting the profitable business into administration, the column said. Toynbee argued the firm would profit more by closing Poundland down and breaking it up.

The employment stakes run well beyond one retailer’s payroll. About 12,000 jobs at Poundland’s stores are at risk, along with 30,000 jobs in its supply chains, according to the column, which described Poundland outlets as “anchor stores” that draw shoppers to high streets. Closures would land just weeks before Christmas.

The column also laid out the financial mechanics. Gordon Brothers has £30m of debt to recover from Poundland and, as both owner and creditor, comes top of the list for repayment in administration: after tax is paid, it gets paid before any staff who are owed wages. If no money is left, redundancy is paid by the taxpayer. Toynbee noted the company has no legal obligation to worry about staff, let alone social or public concerns.

At a closed session of the Commons business and trade committee on Wednesday, MPs heard Poundland’s long-serving managing director, Barry Williams, challenge the owners as he tried to save the business, showing that it made an £18.1m operating profit in the year to September, the column reported. Gordon Brothers has turned down offers for the chain, notably one from Martin Property Group, the owners of NCP car parks.

Andy Burnham weighed in demanding answers, Toynbee wrote. Liam Byrne, the committee’s chair, is campaigning to save Poundland and called Gordon Brothers “much like a wolf on Wall Street, on the British high street”. Byrne said: “It’s clear that they’ve taken millions out of Poundland at a time when they themselves said the business was on a knife-edge.”

Byrne is campaigning for changes to company law, which the column described as currently giving shareholders primacy above all else. Under his proposals, pension funds would no longer make it their sole obligation to maximise short-term gains — money that flows ever more into venture capital — and stress tests would be imposed to stop asset strippers from overloading a business with debt and then taking the lion’s share when it is broken up.

Toynbee placed Poundland in a longer line of takeovers. Woolworths closed 807 stores after being taken over, losing 27,000 jobs, she wrote; BHS, sold for £1, is gone; and Debenhams, WHSmith, Toys R Us, Maplin and TM Lewin were adversely transformed or taken over by private equity in restructurings that usually ended in closures. Asda and Morrisons, bought with debts loaded onto their balance sheets, staggered but survived.

Inside one of the chain’s stores, the picture is immediate. Toynbee described shelves emptying and dejected staff. The manager — whom the column calls Jim to protect his anonymity — was at work an hour and a half after his paid shift ended. “I look out for my team,” he said. He said the store’s outsourced security staff vanished this week after their pay was stopped.

“The shoplifting is very bad now. Look, the high-end stuff has gone first,” Jim said, pointing to the loss of well-known brands rather than cheaper makes. He remains proud of the shop, boasting that its branded goods are far cheaper than at Sainsbury’s, and was glad some Christmas stock had arrived — red velvet Santa stockings and glittery bows. “But no one is telling us anything,” he said.

Jim introduced Toynbee to a colleague in his late 50s. “My best man, by far,” Jim said, describing a man who has worked at the store for 15 years without a single day off sick. Jim fears other shops will not recognise his worth because his English is poor, and said he puts him on the till to try to improve it.

Jim belongs to Usdaw, the shopworkers’ union, but told Toynbee there was nothing it could do. The columnist wrote that the union has “watched helplessly as private equity and venture capital buyouts bring down viable retailers”. One customer, arriving to ask why there were no packs of Boost in the cold drinks cabinet, looked shocked when Jim explained the situation: “No! You can’t close down! I’m always in here.”

Jim told Toynbee he could increase sales if he were allowed to act as the buyer: “I know our customers in this area; the centre doesn’t.” The column cited recent British Social Attitudes research documenting frustration at work, noting that most people remain attached to their jobs and that the greatest aggravations are often about lack of control.

For now, Jim and his colleagues are serving customers and waiting another two weeks to discover their fate. Toynbee argued a future change in the law is essential, but warned it will probably arrive too late — for Poundland’s staff, and for preventing what she described as yet another casualty of venture capital.