Pandemic plunderers scandal: How buy-up of High Street firms during lockdown has cost 40,000 staff their jobs

  • Jobs bloodbath responsible for third of shop, pub and restaurant redundancies
  • Low-paid workers bore the brunt of cuts as private equity model failed
  • Found 26 high street operators announced job losses in private equity hands 
  • MPs and campaigners damned the ‘broken and exploitative business model’

High street firms bought up by private equity tycoons have axed almost 40,000 staff in the pandemic, the Mail can reveal today.

The jobs bloodbath is responsible for a third of all shop, pub and restaurant redundancies reported by big companies.

Low-paid workers bore the brunt of the cuts as private equity’s aggressive business model creaked or failed. The investors themselves emerged relatively unscathed.

The Mail audit found that 26 of the 67 large high street operators to announce job losses in the pandemic are either in private equity hands, or have been.

They have shed 37,609 jobs since March 2020, out of a total of 109,783 lost. Almost 23,000 jobs went at Debenhams and Boots, which were previously in private equity ownership. 

Another 14,609 jobs were axed at 24 other firms which were owned by vulture capital outfits as they entered the pandemic.

MPs and campaigners damned the ‘broken and exploitative business model’ and said the figures showed the ‘scars of private equity ownership’ can last many years. 

A Mail manifesto is calling for an end to the damaging practices of private equity firms.

EG Group founders Mohsin, left, and Zuber Issa’s parents came from India with nothing, and the brothers were brought up in a humble terrace in Blackburn. They have built up a multi-billion-pound petrol station empire – and are buying Asda from Walmart for £6.8billion

Shaun Bailey, a Tory member of the Commons work and pensions committee, said: ‘Secretive private equity firms have taken control of vast swathes of the UK high street and are responsible for many thousands of families’ livelihoods.

‘If we want to build back better, we cannot allow the low paid and the vulnerable of our society to be at the mercy of secretive tycoons. 

‘Cases like Debenhams show the scars of private equity ownership can last many years after owners have profited and moved on.’

Former Tory leader Sir Iain Duncan Smith said: ‘The problems in the high street have been brutally exposed by the pandemic and this has not been helped by private equity companies. 

‘The losers are the staff, who might have been working for a high street chain their whole working lives.

‘Private equity can play an important role investing in start-ups and bringing capital where the banks won’t go. But it’s questionable what they bring to restaurants and retail.’

Private equity can be a lifeline for struggling businesses but in many cases they buy up assets cheaply, load the company with borrowings and extract high fees. 

Food chains such as Pizza Express – targeted by private equity in the 2010s – were some of the hardest hit in the pandemic. Rising wage bills, rents and business rates, as well as towering debt payments had already left them fighting for survival. 

Boots, which shed 4,300 jobs during 2020, also has a history of large-scale private equity involvement (file image)

The downturn wiped out thousands of jobs at Byron, Café Rouge, Ask, Zizzi and Prezzo, leading experts to label private equity’s involvement as a ‘car crash’ and a ‘failure of capitalism’. 

Pizza Express, founded in Soho in 1965, was crippled by a £1.1billion debt pile.

The strategy of private equity owner Hony Capital saddled the company with more than £93million in annual interest payments, equivalent to a sixth of its yearly sales. 

It also extracted £159million in interest via companies linked to the British Virgin Islands.

Many other job losses came at private equity-owned firms shortly before coronavirus struck.

These included New Look, Homebase, Poundworld, Toys ‘R’ Us, Maplin and HMV, which made a combined 12,000 staff cuts.

The biggest failure of the pandemic was Debenhams, which collapsed in December with the loss of close to 18,500 posts. 

Food chains such as Pizza Express – targeted by private equity in the 2010s – were some of the hardest hit in the pandemic (file image)

When it emerged from three years of private equity ownership in 2006, bosses had stripped it of valuable property and saddled it with massive costs and £1billion of debts – a mix many blame for its slow death.

Boots, which shed 4,300 jobs during 2020, also has a history of large-scale private equity involvement.

Dave Turnbull of the Unite union said: ‘When the Covid-19 crisis hit these outfits disposed of thousands of loyal workers. 

‘Now many of them are announcing expansion plans and clearly aiming to carry on with the same broken and exploitative business model.’

Dr Clive Black, an expert on the high street, said: ‘The dalliance between private equity and casual dining has absolutely been a failure of capitalism. It’s a car crash, an absolute disaster. It should absolutely be a case study to rebalance mindsets.’ 

Buying Asda… by loading it with debt 

By Tom Witherow Business Correspondent for The Daily Mail 

To their admirers – and they have plenty – the Issa brothers are rags-to-riches heroes who have made fortunes through hard work and drive.

Mohsin and Zuber’s parents came from India with nothing, and the brothers were brought up in a humble terrace in Blackburn.

Now they have built up a multi-billion-pound petrol station empire – and are buying Asda from Walmart for £6.8billion, with the backing of private equity firm TDR.

But there are serious concerns over the deal – the biggest announced during the pandemic – not least because it is being financed with a mountain of debt.

The Issas, aged 48 and 49 and worth an estimated £3.6billion, have promised to invest £1billion to revitalise Asda’s fortunes.

But critics include Tory MP Alexander Stafford, who warned: ‘We should not let asset-strippers breeze in, tear the company apart, and make a quick profit.

The Issas (pictured), aged 48 and 49 and worth an estimated £3.6billion, have promised to invest £1billion to revitalise Asda’s fortunes

‘It would be completely irresponsible if Asda were to be allowed to be torn apart to turn a quick buck. We should not allow our great companies to be further attacked and dismembered.’ 

Asda is a key part of the economy, employing 145,000 staff and serving around 18million shoppers a week. But there has been barely any discussion about the sale of such an important national business.

The chain can trace its roots back to the Asquith family butchers, who operated a small chain centred in Knottingley, west Yorkshire, in the 1920s. They joined forces with Associated Dairies in 1965 and within a decade had 80 outlets.

Around the same time, the Issas’ father, Vali, arrived to work in the Lancashire garment trade. The brothers worked in their father’s subsequent businesses before striking out on their own.

They borrowed to build up, from a single site in Bury in 2001 to a 6,000-strong empire based on three continents and employing 44,000 staff.

Asda is a key part of the economy, employing 145,000 staff and serving around 18million shoppers a week. But there has been barely any discussion about the sale of such an important national business (file image)

TDR has also invested in the Issas’ forecourt firm as well as the Stonegate pub group and David Lloyd sports clubs.

Sceptics point to the record £2.7billion in high-interest debt raised to fund the £6.8billion Asda deal. The brothers and TDR have put in £780million of their own money.

The sale will be part-funded by selling Asda’s warehouses for over £1.2billion, and leasing them back – another common strategy in such takeovers.

The brothers are also selling Asda’s petrol business to themselves for £750million, which is also being funded by debt.

In another technique often deployed in private equity deals, the Issas could recoup their cash outlay within a year by paying themselves a dividend equal to their investment, analysts said.

An ASDA delivery driver stacks food baskets during his rounds in Bristol as the UK entered the second week of lockdown in March 2020

This week two MPs on the Commons business committee said the deal gambled with jobs and risked leaving the store chain under-invested.

A spokesman for the Issa brothers and TDR Capital said: ‘We have a range of exciting plans to invest in and grow Asda in the years ahead, for the benefit of all stakeholders.

‘These include investing over £1billion into the business and its supply chain over the next three years, increasing the proportion and volume of products purchased from UK suppliers each year while continuing to offer low prices.

‘We are fully committed to providing exciting and enriching employment opportunities.’

They swoop in, pray on firms – then cut and run 

Commentary by Alex Brummer City Editor for The Daily Mail 

When lockdown loomed last year, one of my sons, who works for a City firm, popped into a branch of the men’s clothier TM Lewin at Canary Wharf in London. 

He bought a new suit, sports jacket and some of the famous shirts it makes which are popular among workers in the financial community.

He simply could not do that today. For the business which opened its first shop in the capital in 1898 no longer has any stores at all.

It is the victim of a private equity firm that swooped in May last year and bought TM Lewin as it was struggling during the pandemic. Within just two months the new owner announced it was closing all the firm’s 66 stores.

It made 600 employees redundant and placed the chain in administration – and then immediately bought back its online business, the jewel from which it planned to profit.

The disappearance of one menswear brand may appear of little consequence. But as the Mail reveals today, it is part of a pattern that has ravaged our town centres, leaving empty stores and desolation in high streets and shopping centres across the land.

Debenhams, which shut its remaining stores last weekend after nearly 250 years of trading, is perhaps the most famous of the casualties (file image)

A staggering 37,609 jobs have been lost on the high street at firms linked to private equity since the start of the pandemic – the equivalent of one in three of all jobs in shops, pubs, and restaurants at major firms. 

The modus operandi of many of these ‘vulture capitalists’ is all too familiar to those of us who have studied their baleful influence over the years. 

They prey on firms in difficulty, those which have overborrowed, then scavenge them for meat – before they mostly cut and run.

Far from looking for long-term stability in their acquisitions, their goal is short-term gain. When the going gets tough – and the debt burden of the firm they’ve bought becomes too much – they head for the exit.

In doing so, they are ruthlessly clinical, only too happy to cut potential losses by making workforces redundant, and to reduce exposure to creditors by declaring the company insolvent.

Private equity vultures and their super-secretive investors have been picking away at the carcass of British business in the pandemic with impunity. 

And they have been doing so without observers noticing, using a ‘black box’ approach where no one can see the damage being wrought behind closed doors. 

At B&Q, they worked from the start of the first lockdown on setting up ‘click and collect’ and delivery centres in the heart of their ‘big box’ stores, aiming to provide same-day, if not same-hour, services for customers. Pictured, April 2020 at the Southend on Sea branch

Of course, private equity is not confined to the high street; the Mail has disclosed this week that firms worth £36billion in all walks of business life have been plundered by these largely anonymous fat cats during the pandemic.

But it is perhaps in our traditional shopping areas that the damage is most evident to those whose eyes glaze over at the mere mention of City takeovers and finance deals.

Go down any street of shops today and you will see a number of boarded-up outlets.

The move to online shopping and the devastating effects of lockdown are certainly responsible for much of this.

But private equity sharks – with their eyes on short-term profits – have massively accelerated the trend. 

The result is that shoppers are deprived of their favourite stores and of choice. And with each shop, pub and food outlet closure, competition is erased which in turn leads to higher prices.

The way private equity bosses suddenly plunge high street names into administration also means customers can find the shopping vouchers they have been given as a present are suddenly worthless, along with the tokens and discounts they’ve been offered as regular customers. 

The blight on and damage to British retailing is immeasurable. Debenhams, which shut its remaining stores last weekend after nearly 250 years of trading, is perhaps the most famous of the casualties.

It was taken over by a private equity company which made huge profits from it, then left it with a debt of £1billion – ten times what the figure was before the takeover.

The closure of Debenhams’ department stores has left vast and depressing scars in town centres all over Britain, including in London’s Oxford Street.

But Debenhams is only the tip of an iceberg. The determination of private equity to continue to plunder the UK economy for gain – much of which accrues to offshore investors out of reach of HM Customs & Excise – has seen no let-up at all during the pandemic. 

This rapacious approach could not be in greater contrast to that of the publicly quoted firms such as Marks & Spencer, Next and B&Q-owner Kingfisher, all of which were pummelled by the closure of non-essential stores during the successive coronavirus lockdowns.

Not just TM Lewin and Debenhams, but those exemplars of British design and quality such as Cath Kidston and Jaeger (which was fortunately rescued by M&S). Pictured, publicity image for Cath Kidston

Instead of ruthlessly cutting their losses and permanently shutting down great businesses, they took costly action to protect their employees by making sure that when shops and outlets were allowed to reopen, safety protocols were in place for workers, suppliers and customers.

They rapidly re-orientated their business models, investing in new IT and logistics which is proving one of the keys to survival in the post-Covid world. 

At B&Q, they worked from the start of the first lockdown on setting up ‘click and collect’ and delivery centres in the heart of their ‘big box’ stores, aiming to provide same-day, if not same-hour, services for customers. 

Alongside other retailers, the do-it-yourself giant demonstrated the can-do, dogged, Churchillian spirit needed for British commerce to emerge from the crisis in good shape.

Of course public companies have had to make hard decisions too. They have trimmed the number of stores and let go of some workers. 

But everything they have done has been with long-term survival in mind and carried out with total transparency.

As City Editor, I have had countless conversations with the titans of many of our great public companies, and universally they have stressed the importance of protecting staff and supply chains and bolstering finances for the future. Sales and profits have invariably come second.

None of that sense of public responsibility, continuity and purpose is to be found in many of these private equity firms, however. 

What makes it worse is that the victims of their greed on the high street are not confined to those workers who have been cast aside during the pandemic. 

Each time a chain of stores or restaurants changes hands the collateral damage is immense. 

A whole network of small firms which depend on their business – from dry cleaners to local cafes and sandwich makers – is hurt. 

Suppliers are left with warehouses of unsold stocks. Buildings’ owners are left with unpaid rents.

The closure of Debenhams’ department stores has left vast and depressing scars in town centres all over Britain, including in London’s Oxford Street (pictured)

And while landlords are never anyone’s best friend, this has been calamitous for the big property companies, wiping billions off underlying values, which in turn hits pension and investment funds we all pay into. In other words, this hurts us all.

It has been utterly tragic to see famous British brands and names wiped out in the private equity rush. 

Not just TM Lewin and Debenhams, but those exemplars of British design and quality such as Cath Kidston and Jaeger (which was fortunately rescued by M&S).

Pizza Express is closing scores of restaurants too, but not before its private equity owner savagely shrunk the pizza sizes.

I firmly believe the UK will bounce back from the pandemic and that new businesses will be built out of the embers of the old to eventually take their place.

But the damage being wrought by private equity has to stop. For the sake of British business it is imperative the Government acts to curb the greed and excess of these shadowy companies – and clips the vulture capitalists’ wings. 

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