Wilko collapses into administration after rescue talks fail
Sarah Butler
NEWSFLASH: The troubled budget retailer Wilko has called in administrators, putting more than 12,000 jobs at risk after it failed to agree a rescue deal.
The family-owned household and garden products retailer, which has about 400 stores, is expected to have to close dozens of outlets, leaving big gaps on high streets after weeks of talks with potentially interested parties.
Mark Jackson, the chief executive, said:
“We left no stone unturned when it came to preserving this incredible business but must concede that with regret, we’ve no choice but to take the difficult decision to enter into administration.
“We’ve all fought hard to keep this incredible business intact but must concede that time has run out and now, we must do what’s best to preserve as many jobs as possible, for as long as is possible, by working with our appointed administrators.”
More here:
Key events
Closing summary
Time for a recap.
More than 12,000 jobs are at risk after discount retailer Wilko fell into administration today.
PwC took control of the business after rescue talks with prospective suitors failed. Wilko will continue to trade from its 400 stores “without any immediate redundancies”, but there may be job losses if a rescue can’t be found.
Mark Jackson, the chief executive, said:
“We left no stone unturned when it came to preserving this incredible business but must concede that, with regret, we’ve no choice but to take the difficult decision to enter into administration.
“We’ve all fought hard to keep this incredible business intact but must concede that time has run out and now, we must do what’s best to preserve as many jobs as possible, for as long as is possible, by working with our appointed administrators.”
Zelf Hussain, joint administrator and PwC partner, said:
“It is incredibly sad that a well-loved, family business that has been on the high street for over 90 years has had to go into administration today.
“As administrators, we will continue to engage with parties who may be interested in acquiring all or part of the business.
“Stores will continue to trade as normal for the time being and staff will continue to be paid.”
The GMB union claimed that the collapse could have been avoided with “better management”.
Here’s the full story:
In other news…
British house prices saw the most widespread falls since 2009 last month as interest rates hit a 15-year high, surveyors warned.
Rics also reported that rents surged last month.
More borrowers have fallen into arrears on their mortgages, data shows, including a large rise in buy-to-let landlords missing payments.
And court proceedings for no-fault evictions in England have reached their highest level in six years, ahead of new legislation being passed to ban the practice.
In the US, inflation has risen to 3.2% per year in July.
ING says the data boosts the case for no further US rate hikes:
A second consecutive benign set of inflation prints adds to optimism that the Fed rate hike cycle is at an end and a soft landing is achievable for the US economy.
The British government is considering tightening rules on investment in China after the US president announced new measures aimed at limiting the dollars and expertise flowing into sensitive technologies in the country.
Here’s the rest of today’s news:
Jim Waterson
A local newspaper publisher facing a staff exodus and a strike ballot over low pay has announced it is considering a bid for the Daily Telegraph.
National World, which owns regional titles including the Scotsman and the Yorkshire Post, told the stock market it was a “possible participant” in the bidding for Telegraph Media Group.
The company said owning the Telegraph would fit with its policy of making acquisitions and then “implementing its new operating model”. This approach includes using artificial intelligence to automate the process of creating newspapers and reduce the need for human involvement.
More here:
As well as Wilko customers, we’d also like to hear from staff at the retailer.
How long have you worked and there and how will you be affected? What have you been told by your employer? Are you concerned for your job?
Back in the mortgage market, Forbes are reporting that NatWest will cut its rates on Friday.
They say:
“NatWest is cutting selected two- and five-year fixed rates by up to 0.65 percentage points for new customers from tomorrow (11 August).
“It is offering a two-year fixed rate for remortgage at 6.16% (60% LTV) with a £995 fee and an equivalent five-year fix at 5.63%. The bank is also cutting fixed rates across its first-time buyer, shared equity loan, help to buy remortgage deals and buy-to-let loans.”
Wilko could still keep operating as a going concern, protecting staff jobs, if a buyer can be found, says Michael Lynch, partner at city law firm DMH Stallard:
“Wilko entering into formal administration does not necessarily mean it cannot continue as a going concern, with the saving of jobs.
“Parties interested in purchasing Wilko prior to its administration will now find a more attractive business to purchase, without its previous debt burden and reported capitalisation requirements.
“The appointed administrators will likely have determined the purpose of the administration; if that purpose is to rescue the company as a going concern, then that would indicate that there is good potential to achieve that.
“Any continued trading under administration is supportive of an ongoing sale. However, unless there is a purchaser already ready to go, the appointed administrators will need to take a measured and independent view of the viability and value of the business before taking steps to market and sell the same.
“Ultimately, administration is a collective insolvency tool that arose to preserve a business, safeguarding it from creditor action, whilst looking to realise the business and/or its assets for the benefit of its creditors.”
Here’s the open letter from Wilko CEO Mark Jackson today, in which he announces that administrators are to be appointed:
Jackson signs off by saying:
It’s been an honour to have worked alongside you all as we fought to realise and to maximise the significant opportunities that existed to re-establish a profitable Wilko.
B&M, Poundland and Home Bargains will benefit from Wilko’s crisis, says Orwa Mohamad, analyst at research group Third Bridge:
“Wilko had lost its way on pricing and customers are aware of this. They had lost their way on availability and competitors fared much better. Similarly, Wilko’s online offers have gone significantly downhill over the last couple of years while competitors continue to invest in this area.
“The three retailers that will most benefit from the sad news of Wilko are B&M, Poundland and Home Bargains. It will be somewhat of a competition in trying to hoover up Wilko customers.”
Here’s GMB union leader Gary Smith:
This is a good point:
Fans of Wilko have been sharing their sadness about the chain’s fall into administration today, and their concerns that stores may close if a buyer isn’t found.
Wil
Labour MP Jonathan Reynolds, the shadow business secretary, says Wilko’s fall into administration is ‘dreadful news’ for its staff, and their families:
Wilko’s administrators: ‘It’s incredibly sad’
PwC have been appointed as Wilko’s administrators, and confirmed that the retailer will continue to trade from all its stores “without any immediate redundancies”.
Jane Steer, Zelf Hussain and Edward Williams from the corporate finance firm have been appointed to oversee the process.
PwC said the retailer has suffered “increasing cashflow pressure and a deterioration in trading” after sales were hit by the pandemic and cost-of-living crisis.
Hussain said:
“It is incredibly sad that a well-loved, family business that has been on the high street for over 90 years has had to go into administration today.
“Many high street retailers are facing a number of well-documented challenges and Wilko has been significantly impacted by the headwinds facing the industry including inflationary pressure and rising interest rates.
“As administrators, we will continue to engage with parties who may be interested in acquiring all or part of the business.
“Stores will continue to trade as normal for the time being and staff will continue to be paid.”
US inflation rises to 3.2%
Just in: the US inflation rate has risen, but remains a lot lower than in the UK.
US consumer prices rose by 3.2% a year in July, official data just released shows.
That’s lower than the 3.3% that economists forecast, but could still raise concerns that America’s fall in inflation is bottoming out.
During July alone, prices rose by 0.2% – driven by higher housing costs, and a 0.2% monthly increase in food prices.
Encouragingly, though, core US inflation (stripping out food and energy) dipped to 4.7% a year from 4.8%.
The latest UK inflation report is due next Wednesday, after UK prices rose by 7.9% in the year to June. The Bank of England has predicted UK inflation will drop to 7% in July.
Wilko shoppers: tell us what you like most about the store
We’d like to hear from people who shop at Wilko. What do you like about the store and what will you miss most?
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Shoppers have spoken of their disappointment over the potential collapse and prospect of more vacant shops in UK high streets.
Pam Comer, 72, who visited the Wilko store in Ely, Cambridgeshire, with her husband, told PA Media:
“It’s sad – more empty shops.
“I feel sorry for the people employed by Wilko.”
Wilko’s fall into administration is part of a wider trend of UK companies collapsing.
Government figures last month showed that the number of firms falling into insolvency has risen to the highest level since 2009 in England and Wales, in the last quarter.
Rising borrowing costs, and the squeeze on consumer spending, has hit retailers, hospitality firms and other companies.
Matthew Hennessy-Gibbs, insolvency litigation partner at Keystone Law, says:
“Company insolvencies reached a higher level in July than in 2009 and regrettably that trend seems set to continue as retail giant Wilko has collapsed into administration putting 12,000 jobs at risk. No sector is immune to what was first a financial pinch but is now a choking financial squeeze. Many big-name brands have gone to the wall in 2023 and some of those that have been “rescued” have had to close a number of sites.
Kalyeena Makortoff
Persimmon, one of the UK’s largest housebuilders, has cut 300 jobs as weak demand linked to the fallout from the government’s autumn mini-budget sent half-year profits plunging by 65%.
The company said it was pushing ahead with a cost-cutting drive, as it grappled with a drop in customers committed to buying homes after the market meltdown, which pushed up interest rates and made mortgages more expensive for prospective homeowners.
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