Almost 11,000 jobs are at stake after BHS announced rescue attempts to save the 88-year-old high street chain failed. The news come less than a month after commercial landlords agreed to reduce rent on some of its stores in a bid to save BHS from administration, and after last-minute talks to sell some of the 164 UK stores to Sports Direct floundered over the weekend. Duff & Phelps have been called in to handle administration and will keep stores open as it tries to find a buyer.
Harsha Wickremasinghe, Associate at Livingstone Partners, comments on the BHS collapse: “The BHS business model itself is at the root of the problem. Its relevance to the current market is unclear – in terms of product range, brand appeal and distribution strategy. These structural weaknesses, coupled with soaring rents, high business rates and pension liabilities, alongside the impact of the National Living Wage, gave BHS little room to manoeuvre.”
He adds that BHS has been a ‘problem-child’ for some time as “its offer lacked any clarity, whilst rivals such as Debenhams, House of Fraser and John Lewis have all invested heavily in developing their ranges, multichannel capabilities and heavily-refurbishing their stores.” BHS has over £1.3bn in debts including £571m in pension liabilities to be investigated by the Pensions Regulator, which will also consider whether to force former BHS owner Sir Philip Green, who sold BHS for £1 last year, to contribute towards the company’s pension deficit.
Christina Tolvas-Vincent, Head of Retail Employment at Bond Dickinson, comments: “Press reports suggest various officials at the shopworkers’ union USDAW are calling for urgent talks with the company. The experience with Woolworths suggests that the union is certainly not averse to taking legal action when it believes that appropriate consultation with employees has not taken place. However, employers desperate to rescue a struggling business often find it difficult to gauge when and how to engage with the workforce as there is little clarity on whether a sale of the business is likely to be possible or whether redundancies may prove necessary; something that is usually a decision for the administrators at a later stage in any event.”
“The legal requirements can be difficult to interpret and cases are still progressing through the courts on potential criminal liabilities where there has been a failure to notify The Department for Business, Innovation and Skills (BIS). The potential penalties are enormous: an unlimited fine for a failure to notify BIS and compensation of up to 90 days’ actual pay for each affected employee for a failure to carry out collective redundancy consultation properly,” Tolvas-Vincent adds.