February 17, 2024
Debenhams closure and Arcadia collapse put 25,000 UK retail jobs at risk

Debenhams closure and Arcadia collapse put 25,000 UK retail jobs at risk

Debenhams, which collapsed into administration in April for the second time in 12 months, said in a statement on Tuesday that it has been unable to find a buyer and will begin to wind down operations. Its 124 UK outlets and online store — employing 12,000 people — will trade to clear stock, after which they will close if no other offers for the business have been received.

The future of its 45 franchised stores, which are primarily in the Middle East, south east Asia and eastern Europe, also depends on whether a buyer can be found for the UK business.

Earlier on Tuesday, sports retailer JD Sports Fashion confirmed that it had ended discussions about buying Debenhams.

“The economic landscape is extremely challenging and, coupled with the uncertainty facing the UK retail industry, a viable deal could not be reached,” joint administrator at FRP Advisory, Geoff Rowley said in the statement.

Debenhams said the closure does not impact Magasin du Nord, its department store chain with seven outlets in Denmark, which continues to operate independently.

The decision by Debenhams to close in the UK delivered a fresh blow to Britain’s retail industry, which was already reeling from news of Arcadia’s collapse into administration hours earlier. Arcadia, which employs 13,000 people, continues to trade and is seeking buyers for its businesses — eight fashion brands including Miss Selfridge and Dorothy Perkins. Analysts view online retailer Boohoo as a promising suitor.
Topshop owner Arcadia files for bankruptcy

Debenhams, on the other hand, might finally have run out of road. “Arcadia’s brands have an opportunity to survive if broken up but after operating in its second round of administration for some time, Debenhams’ hopes of living on are slim,” said Pippa Stephens, a retail analyst at GlobalData.

The impending store closures are “yet another huge blow for the UK high street” and shopping centers, she added, which could pose problems for real estate companies, particularly those already in financial turmoil, such as Intu.
Britain’s clothing retailers are suffering a severe slump in sales. Marks & Spencer (MAKSY) and Selfridges are among major companies to have announced sweeping job cuts as a result of the pandemic, which closed stores for months, weakened demand for office and formal wear, and accelerated a shift to online shopping that was already hurting high street stores.
The UK economy is also battling its worst recession in more than 300 years, as it faces a one-two punch from the coronavirus and Brexit. There’s less than a month to go until Britain’s transitional agreements with the European Union expire. Failure to strike a new trade deal before December 31 will make it much harder for the economy to recover.

The Office for Budget Responsibility, Britain’s independent fiscal watchdog, said last week that it expects unemployment to rise to 7.5% by the second quarter of 2021, meaning 2.6 million people will be without jobs — 1 million more than the current level.