The crisis at Poundland has sparked fresh concern over private equity ownership of British high street brands as the budget chain teeters on the brink of collapse.
Poundland, which was bought by Gordon Brothers for £1 last year, looks set to crash into administration this week, putting 600 stores and 12,000 jobs at risk in the run-up to Christmas.
Politicians and retail veterans said the demise of the company exposes a worrying trend that has seen private equity vultures prey on household names across Britain.
The row comes amid warnings that private equity has ransacked the London stock market – with figures from City broker Peel Hunt showing more than 100 UK-listed firms have been snapped up by such buyout groups in the past five years.
Gordon Brothers has rejected a rescue bid for Poundland – sparking fears it is trying to sell the group off piecemeal rather than secure its future.
Labour MP Liam Byrne, who is chairman of the business, innovation, science and trade committee, said: ‘There is this wider question of whether this is yet another bit of the British high street that has been overloaded with debt in an unsustainable way by venture capitalists.’
Poundland is nearing collapse after its owners rejected a bid for the brand
Calling on the Government to convene talks in a bid to save Poundland from collapse, he added: ‘Ministers have got to move pretty sharpish today to understand whether 12,000 British jobs are about to be sacrificed so that an American investment house can have a bumper Christmas.
‘This is three times as many jobs as British Steel that are at stake. You’ve got creditors and suppliers all depending on a rescue and you’ve got this thick layer of mystery around Poundland that we’ve got to cut through.’
Poundland, which filed a notice of intention to appoint administrators at the high court last week, closed around 200 shops as part of a sweeping restructuring under the US investment house.
The business started to rebound but Gordon Brothers put the retailer up for sale in September and has since rejected a bid that would have saved the whole company and its 600 stores.
It has fuelled concerns that the private equity firm is pushing Poundland towards administration despite receiving a bid from Martin Property Group that was backed by Poundland’s management.
The Northern Irish firm reportedly refused to meet demands for an upfront repayment of a £30million shareholder loan, which Gordon Brothers inherited from previous owners Pepco.
That means the 36-year-old retailer’s brand and its shops will not be sold as a whole, leading to a break-up of Poundland – and meaning jobs are at risk at any shop not bought.
Byrne told the BBC: ‘I’m afraid we have seen a pattern of behaviour now from private equity at Morrisons, Asda, WH Smith, Body Shop, where they’re basically geared up to the nines, overburdened with debt and its workers and high streets and consumers that end up paying the price when it all goes wrong.’
Poundland’s failure would mark one of the biggest High Street collapses since Debenhams closed its doors in 2021 with the loss of 12,000 jobs.
Andy Higginson, former Poundland director, said he was ‘not entirely surprised’ by the crisis at the retailer.
He told the BBC: ‘Often particularly through the private equity cycle, good businesses can end up with bad balance sheets and that may be the case here. The situation we face is a tricky one in that the owners interests and what we the public might consider the business’ interests, can be different.’
Ministers have signalled that they are ready to take action, with the Prime Minister Andy Burnham and Business Secretary Jonathan Reynolds last week demanding answers from Gordon Brothers and instructing officials to establish the facts.
Over the weekend, Reform UK Treasury spokesman Robert Jenrick accused Gordon Brothers of ‘crony capitalism’ and called on the government to ensure Poundland ‘is not stripped for parts by its American owners’.
And Steve Smith, founder of Poundland, estimated 30,000 jobs were at risk because the retailer’s ‘suppliers will suffer or be at risk of going into administration.’
He said: ‘If Poundland goes into administration the suppliers will get next to nothing in the pound they are owed and 12,000 people will lose their jobs, the only people that will make a lot of money out of this will be the liquidators.’
The City has already sounded the alarm on the raid of listed British firms by private equity, with 131 firms taken private since 2021, according to figures from Peel Hunt.
Higginson said businesses had fallen into private equity hands as banks failed to cater to small and medium-sized firms, with the stock market ‘a shadow of its former self’.
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