Monthly Archives: April 2016

BHS to file for administration, putting 11,000 jobs at risk

Alexander Tredwell – Leaders in Specialist Professional Recruitment

High Street retailer BHS is to file for administration on Monday, threatening almost 11,000 jobs.

BHS representatives have told the BBC that it will go into administration.

It comes after sources close to the company’s owners admitted that “things don’t look good”.

Talks with Sports Direct to sell some of BHS’s 164 stores collapsed over the weekend, and it is understood any buyer would do so only if it did not have to take on the £571m pension deficit.

In a letter to staff, BHS owner Dominic Chappell said: “It is with a deep heart that I have to report, despite a massive effort from the team, we have been unable to secure a funder or a trade sale.”

Mr Chappell said he was “sincerely sorry” and assured staff they would be paid their wages this month.

He added: “I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget, you all need to keep your heads held high, you all have done a great job, but remember that it was always going to be very very hard to turn around.”

He suggested that Phil Duffy, a managing director at Duff & Phelps, had been appointed as administrator.


stores across the UK

  • £1.3bn – total debt
  • £571m – pension deficit
  • 1928 – the year BHS opened its first store, in Brixton, London

Last year, Retail Acquisitions, a consortium of financiers led by Mr Chappell, bought BHS from the retail entrepreneur Sir Philip Green for £1.

At the time, Retail Acquisitions said they would deliver £160m of funding to help turn around the fortunes of the chain, but have not been able to raise the sum.

Shopworkers’ trade union Usdaw said it was “seeking urgent clarification from the company”.

It also called on BHS to begin a dialogue “at this difficult and worrying time for staff”.

Phil Dorrell, a retail analyst, told the BBC that going into administration “doesn’t mean the stores close today, it means a buyer is sought”.

The likelihood is BHS will be sold off “store by store” and “that probably means the name will disappear”, said Mr Dorrell, managing partner at Retail Remedy.

“The problem is their trading offer is in the 1980s,” he said. “Their stores look a bit dated. They are behind the times.”

Last month, the brand was rescued from the brink after creditors voted to accept a cut in the rent bill for about half of its stores.

BHS simply didn’t change – or at least didn’t change fast enough – while retailers all around them did.

Britain has the most competitive and dynamic retail environment in the world, which attracts shoppers globally. Consumers here expect more, and they get more from nimble players such as Primark, Zara and M&S.

BHS could also have changed a decade ago – as online shopping came to the fore – but it missed that boat as well.

So, barring a last minute miracle, BHS will have new owners soon.

But in the worst case scenario it will go the same way as Woolworths and Comet and disappear from the High Street.

When the deal was approved, chief executive Darren Topp said he wanted the British public to give BHS a “second chance”.

“We want to make it an iconic British brand again. We would like the British public to give us a second chance. Come and see our stores and you will be surprised,” he said.

But despite the rent deal, BHS warned that it needed extra funding to continue trading.

It had been due to announce a new £60m loan last week, but failed to do so.

Separately, Retail Acquisitions had been hoping to raise £100m from property transactions.

They sold their Oxford Street lease in London for £30m but it was far less than they hoped for. And they also sold the lease on a Sunderland store to Sports Direct’s Mike Ashley for £2m.

The retailer has debts of more than £1.3bn, including the pension fund deficit.

BHS denied speculation on Friday that it was on the brink of falling into administration. A spokesman said it was “business as usual” at the company and it was “on track” with talks over funding.

Sir Philip Green and Sports Direct could not be reached for comment.

  • 1928: A group of American entrepreneurs set up British Home Stores. The first store is in Brixton and nothing in the store costs more than a shilling (5p) – double that of rival Woolworth’s maximum price of sixpence
  • 1929: BHS raises its maximum price to five shillings (25p) allowing it to sell home furnishings, including drapery
  • 1970: The firm expands steadily in the postwar era – by the beginning of the year it employs some 12,000 workers in 94 stores across the UK
  • 1985: BHS begins to franchise its brand to stores around the world, to which it supplies products and support
  • 1986: The store merges with designer Sir Terence Conran’s Habitat and Mothercare to form Storehouse Plc, and the “British Home Stores” name is replaced with “BhS”, then “Bhs” and eventually “BHS”
  • 2000: Retail billionaire Sir Philip Green buys BHS from Storehouse Plc for £200m
  • 2002: BHS becomes part of the Arcadia empire, controlled by Sir Philip, when he buys the clothing group and its Topshop, Dorothy Perkins and Burton brands
  • 2005: The store resurrects its “British Home Stores” branding, but it is losing ground to cheaper rivals like Primark
  • 2015: Sir Philip sells the loss-making BHS for £1 to Retail Acquisitions led by Dominic Chappell, writing off £215m of debts in the process
  • 2016: BHS begins an insolvency procedure to reduce its rents and transfer its pensions liabilities into the Pension Protection Fund, the government-supported rescue agency



UK unemployment rises to 1.7m

Alexander Tredwell – Leaders in Specialist Professional Recruitment

UK unemployment rose by 21,000 to 1.7 million between December and February, the Office for National Statistics (ONS) says.

That is the first increase since the May-July period of last year.

The unemployment rate remained at 5.1%, which is still down on the same time last year, when it was 5.6%.

Earnings, including bonus’ rose by 1.8% in the three months to February, which is a slowdown from the 2.1% rate for the previous three-month period.

“It’s too soon to be certain, but with unemployment up for the first time since mid-2015 – and employment seeing its slowest rise since that period – it’s possible that recent improvements in the labour market may be easing off,” ONS statistician Nick Palmer said.

There were 31.41 million people in work in the three months , a rise of 20,000 on the September to November period.

Some economists believe uncertainty linked to the 23 June referendum on EU membership could be deterring companies from taking on new staff.

“Last week the Bank of England said that concerns about the EU referendum had begun to affect the real economy,” said Ben Brettell, senior economist at Hargreaves Lansdown.

“The increase in unemployment announced today adds some weight to that hypothesis. It’s possible businesses are delaying decisions about hiring and investment until after June’s vote, which could lead to a slowdown in the first two quarters of this year.

“Nevertheless, the bigger picture is that the UK labour market remains in reasonable health,” he added.

The increase in unemployment was too low to change the rate when expressed to one decimal place, which stayed at a decade low of 5.1%.

The figures also show that there were 5.35 million people employed in the public sector for December 2015. This was scarcely change compared with September 2015 but it was down 50,000 from a year earlier.

The ONS said the number of people employed in the public sector has been generally falling since March 2010.

In the private sector there were 26.07 million people employed for December 2015 – that is 113,000 more than for September 2015 and 529,000 more than for a year earlier.

In the October to December 2015 period the number of UK nationals working in the UK increased by 278,000 to 28.2 million compared with the same time in 2014. At the same time the number of non-UK nationals working in the UK increased by 254,000 to 3.22 million.


Steel jobs ‘can be saved by tech’, says energy researcher

Alexander Tredwell – Leaders in Specialist Professional Recruitment

The UK steel industry is doomed unless it embraces cutting-edge technology, a Cambridge professor has warned.

Prof Julian Allwood said the only way to save steel jobs was to make high-value products for industries in which the UK leads the world.

New methods could scrub impurities from recycled steel to make products for the aerospace and car industries, he said.

It comes as efforts are being made to save thousands of jobs at Tata Steel’s Port Talbot steel plant in south Wales.

The announcement by the Indian company that it is to sell its UK business is the latest blow to an industry which has seen a succession of job cuts.

Prof Allwood said current plans for the steel industry did not go far enough, because they did not utilise the latest technology.

In his six-year study on the steel sector, the predicament of the industry appears stark.

“The global steel industry today has more capacity for making steel from iron ore than it will ever need again,” he said.

“On average, products made with steel last 35 to 40 years, and around 90% of all used steel is collected. This is easy because it’s magnetic.

“The supply of steel collected from goods at the end of their life therefore lags the supply of new steel by about 40 years.

Prof Allwood said the steel market would continue to grow – but all future demand growth could be met by recycling the existing stock of steel.

And it was, therefore, futile for the UK to attempt to compete against low-wage economies for mass market steel.

Reducing industrial electricity costs in Britain would help, but only a little, he said, and the UK should instead concentrate on recycled steel.

That is what is proposed by Sanjeev Gupta, the entrepreneur who has expressed interest in turning the Port Talbot works into a recycling plant.

But Prof Allwood said that plan did not go far enough, because most scrap metal contained impurities that made it suitable for only low-value products, such as steel reinforcing bars, which were subject to heavy international competition.

It would be far better, he said, to harness science to make pure hi-tech steel that met the needs of the UK’s leading industries.

“UK taxpayers will have to bear costs of Tata Steel’s decision to close the Port Talbot plant,” he said.

“If the existing operations are to be sold, taxpayers must subsidise the purchase without the guarantee of a long-term national gain.

“If the plants are closed, the loss of jobs, income and livelihoods will reverberate throughout the UK steel supply chain.

“Instead, the strategy presented here enables taxpayers to invest in a long-term structural transformation.

“This would allow UK innovation ahead of any other large player.”

While many will applaud his analysis, some will ask how this theoretical model can be translated into real equipment and jobs – especially as the UK does not have an industrial strategy that would encourage this sort of thing.

Prof Allwood pointed towards the Danish wind industry as an example of successful government strategy to create jobs with a new product.

The steel transformation in the UK could be funded by a long-term loan from the government, which will have to bear the costs one way or another.

It would involve many of the current jobs being saved, but workers would need to retrain.

Prof Allwood said the hi-tech transformation had not happened yet because low margins in the European steel industry had squeezed investment – and China did not have the stock of old steel to make it relevant yet.

He said it might take three to five years to develop the technologies needed to transform the industry.

It would be estimated to cost £1-2bn, which he said was good value compared with the social costs of shutting the industry.

Dr Sarah Green, a metallurgist from Lancaster University, said: “It’s common sense to maximise recycling efficacy in the UK steel materials cycle.

“Whether this alone will generate sufficient economic activity on a suitable timescale to offer a substitute for the current steelmaking sector is something that I am less certain of.

Gareth Stace, of UK Steel, told BBC News: “We don’t agree that there won’t be a new need for virgin steel – we think we need more capacity.

“But we welcome this report – especially the recognition that the steel sector has been starved of investment in technology because of the crisis we have been in for years.

“There are steelmakers in the UK that make world class steel, but we are desperate for more investment.”

Another expert also called for more research.

“The task is getting harder at the moment because impurities from copper get greater the more wiring there is in cars,” said Prof Sridhar Seetharaman, chair in low carbon materials technology at the University of Warwick.

“Britain could lead the way by government supporting funding in this.”


BP boss Dudley faces shareholder action over £14m pay

Alexander Tredwell – Leaders in Specialist Professional Recruitment

BP holds its annual shareholders’ meeting on Thursday with some investors planning to vote against chief executive Bob Dudley’s 20% pay rise.

Shareholders in the oil giant are concerned that rises for Mr Dudley and other executives come despite job cuts and falling profits.

Those who have spoken out include Aberdeen Asset Management and Royal London Asset Management.

But BP said the firm’s performance beat most measures that determine pay.

The pay rise for Mr Dudley takes his salary package to £14m.

Shareholder group Sharesoc branded the pay deal “simply too high”, while Glass Lewis, ShareSoc, Pirc and Institutional Shareholder Services have also expressed their opposition.

Ashley Hamilton Claxton, corporate governance manager at Royal London, told the BBC: “The executives received the maximum bonuses possible in a year when [BP] made a record loss, and to us that just does not translate into very good decision-making by the board.

“We think it sends the wrong message. It shows that the board is out of touch.”

Meanwhile, the Institute of Directors warned on Wednesday that the pay increase risked sending “the wrong message to other companies”.

IoD director-general Simon Walker said the “pay package will seem unjustified to many shareholders, considering the performance of the company over the past 12 months”. Last year, BP made a £3.6bn loss and announced that thousands more jobs would be cut.

The vote on BP’s remuneration report is “advisory”, so even a vote against would not strictly require any change of tack from the company.

However, Ms Hamilton Claxton told the BBC’s Today programme that 20%-25% of shareholders might vote down the pay deal, which would force BP to “think long and hard about their decision”.

BP’s pay policy is subject to a binding shareholder vote every three years.

It was last set in 2014, meaning new proposals are due to be put forward for shareholder approval again in 2017.

Tim Bush, head of governance at the investors’ advisory consultancy Pirc, told the BBC’s Today programme on Thursday that the “pay model is broken”.

Paying chief executives on a formula devised two or three years ago was not sensible. “There is a major problem in the way chief executives are recruited and paid,” he said.

But Mark Freebairn, partner at recruitment firm Odgers Berndtson, told Today: “If Bob Dudley was to leave [BP] it would be for a competitive company and remuneration would be part of the discussion. If you operate in a global market, you have to operate on a global scale.”

BP was now in a far better position than when Mr Dudley took the helm, he said.

A spokesman for BP said shareholders themselves had backed the pay formula.

“Despite the very challenging environment, BP’s safety and operating performance was excellent throughout 2015… BP’s performance surpassed the board’s expectations on almost all of the measures that determine remuneration – and the outcome therefore reflects this.

“And these clear measures derive directly from BP’s remuneration policy which was approved by shareholders at the 2014 AGM with over 96% of the vote,” the spokesman said.

Giving someone a 20% pay rise for a year’s work that saw BP record its biggest ever operating loss seems perverse even by chief executive pay standards.

If it’s any consolation, (I doubt it will be), bosses at Exxon and Chevron got paid even more than Bob Dudley even though the value of their companies fell by more than BP. That’s the bit that sticks in the craw for many. Under what circumstances don’t these guys get paid a fortune? It would be fine if some years you win, some years you lose – but they never seem to lose.

We may get a rebellion of 20-30% of shareholders today but even if it was more than 50%, the board doesn’t have to listen. Shareholders do have a binding every vote every three years on the pay policy and formula. No use crying now, the formula that spat out £14m for Bob Dudley was approved in 2014 by 96% of shareholders.



Co-operative Group boss asks for massive pay cut

Alexander Tredwell – Leaders in Specialist Professional Recruitment

The chief executive of the Co-operative Group has asked for a 40% pay cut because the job has become easier.

Chief executive Richard Pennycook says the business is now back “in calmer waters” and the reduction reflects the revised demands of the current job.

He told the BBC the pay cut was “by no means the main news”, which was the Co-op’s recovery, for which he credited his 70,000 staff’s “dedication”.

His base salary will fall from £1,250,000 to £750,000.

Mr Pennycook was finance director of the group, but took over as chief executive in 2014 when the former boss, Euan Sutherland, resigned after 10 months in the job.

His pay package was reported to be £3m.

In 2013, the Co-op was rocked by news that its bank had a £1.5bn hole in its capital. That was rescued by a group of investors and the Group retains a small stake in the bank.

The Co-operative Group, which comprises 2,800 food stores, 1,000 funeral homes and financial services, said it had made progress this year, with sales at both its food and funeral home businesses growing.

Profit was £23m for the year, down from £124m last year, when the figure was boosted by a one-off gain of £121m from selling parts of its business.

Sales in its 2,800 food stores grew 1.6%, to give a £250m profit.

At its funeral homes, which is the largest chain in country, profits were £78m and sales rose by 9.9%.

Group underlying profit before tax was £81m, up from £73m last year.

The Co-op said its convenience stores were outperforming the UK grocery market, because people’s shopping habits were changing as they made more frequent trips to buy food.

Earlier this week, grocery research firm Kantar reported that the Co-op’s sales had risen at their fastest rate since it bought rival Somerfield in 2011, climbing by 3.9%.

It plans to open another 200 funeral homes in the next three years, which will increase the size of its estate to more than 1,100 homes.