Debenhams, Arcadia: Making workers pay for the crisis

Tens of thousands are set to lose jobs and suffer pension cuts, once again making workers pay the price for capitalism’s failings.

Proletarian writers

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Now that his empire is collapsing many commentators are keen to present serial looter Sir Philip Green as a rotten apple, giving capitalism a bad name. But the truth is that it is capitalism that creates sociopaths by incentivising sociopathic behaviour, and while he was riding high, the ruling class and its hirelings were happy to endorse the very behaviours they now so hypocritically condemn. And even as they condemn, none of them for a moment considers an attempt to repossess the billions Green and his wife have plundered from the businesses their workers made so lucrative, despite the fact that thousands of workers are now to lose both jobs and pension rights.

Proletarian writers

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The collapse of both Arcadia and Debenhams in the space of just two days comes as the climax of a year that has already seen over 200,000 retail jobs lost and 20,000 stores closed. The collapse of Arcadia threatens the loss of 13,000 jobs and that of Debenhams a further 12,000.

Whilst this crisis in the retail industry has been hastened and intensified by the pandemic, its root cause is the cut-throat competition within a crowded retail market, with those players further advanced along the road of online marketing pushing more traditional high street traders to the wall.

But online shopping is not the root cause of the retail crisis either. Rather, it is the anarchy of production inherent within the capitalist system. The problem is not with online retail itself, any more than with automation generally, but with the destructive role it inevitably plays within capitalist commodity production.

As ever under capitalism, application of innovative technique in any sector of the economy, rather than lightening the burden of labour, just throws hundreds of thousands more workers onto the dole. Nostalgic dreams about rejuvenating the flagging high street let capitalism off the hook and do not address the basic problem.

The reality is that in any case most of the landmark chain stores on the high street, whilst living on their laurels as solid and dependable household names, have long since been hollowed out from within, falling prey to the vulture capitalists.

“Debenhams has been owned by hedge funds including Silver Tree and Golden Asset Management since a debt-for-equity swap last year that wiped out equity investors, including Mike Ashley’s Frasers Group. It has been in a trading administration since April, when it filed for protection from creditors.

“Mr Ashley has unsuccessfully tried to seize control of Debenhams and had offers to rescue the business rejected; his bid was less than half the administrators’ asking price of £300m. Mr Ashley’s Frasers Group may yet attempt another bid for the business now that it is in liquidation, although it is thought that he would be most interested in buying a parcel of its best-performing stores. Next, Marks & Spencer and John Lewis might also want to cherry-pick shops that could improve their existing estates.” (Debenhams to close with loss of 12,000 jobs by Ashley Armstrong, The Times, 1 December 2020)

Fighting for scraps

Masquerading as ‘rescue bids’, all that interests these market players is breaking their former competitors down for scrap while hanging on to the most profitable bits. The collapse of Debenhams was triggered by that of Arcadia, and now it is open season on Arcadia’s brands.

“City sources were doubtful that there would be a sole buyer. Instead, they believe that the group will be broken up, with fading brands such as Burton, Wallis and Dorothy Perkins likely to disappear. ‘Arcadia is a real hotchpotch. There’s still some value in Topshop and Topman and maybe Miss Selfridge,’ one senior retailer said.” (The same City source makes the telling observation that, whilst the pandemic had speeded things up, “These brands have been struggling for a long time.”)

“Mike Ashley’s Frasers Group has already advertised its interest in Arcadia’s brands. The company behind Sports Direct said yesterday that Arcadia had rejected its offer of a £50m ‘lifeline loan’.

“Several groups are thought to have been sounded out informally to see if they might be interested in parts of Sir Philip’s empire, including Next, the FTSE 100 fashion retailer. Asos, the online fashion retailer, is likely to consider some of Arcadia’s brands but would balk at operating physical stores. Marks & Spencer, too, will weigh bids for parts of Arcadia.

“Boohoo, the fast-fashion retailer behind brands including Pretty Little Thing and Nasty Gal [sic], has been linked with Topshop.” (High street reels from Arcadia fall by Ben Martin and Simon Duke, The Times, 1 December 2020)

Pensions rip-off

Whilst this feeding frenzy is in full swing, the future of shop workers’ pensions hangs in the balance. Back in 2005 when ‘Sir’ Philip Green (knighted by Tony Blair) and his Arcadia empire were on the crest of a wave and he was giving his Monaco-domiciled wife a tax-free £1.2bn dividend, Arcadia’s pension scheme was running a £12.7m surplus.

By August 2018, under Sir Philip’s careful stewardship, the retirement fund was showing a deficit of £138m. The likely cost of getting an insurer to take over the pension scheme now and carry on paying benefits at their present level is estimated to have risen to £350m.

In practice, the scheme will wind up in the ill-named Pension Protection Fund, where scheme members can expect to lose around 20 percent of their entitlements. Green’s wife, the nominal owner of Arcadia, promised in 2019 to inject £25m into the pension fund followed by three further tranches of the same amount. So far, two of these have yet to be paid.

Green has some previous form when it comes to abandoning ship before the iceberg hits. He famously sold BHS to Dominic Chapelle for £1, hoping thereby to dodge responsibility for the BHS pension fund when the chain collapsed the following year.

After a lengthy legal wrangle Green grudgingly wound up paying £363m towards the fund. Unlike the serial bankrupt Chapelle, who has just been sent down for six years for tax evasion, Green gets to keep his £46m Gulfstream jet, his £100m superyacht and his knighthood. Such is the advantage of knowing where all the bodies are buried.

This is the state of capitalism in Britain today, where scoundrels and buffoons rule the roost whilst workers learn of their sacking (as in the case of Debenhams) via conference calls and see 20 percent of their pensions benefits robbed from them in broad daylight.

It is time for workers to stop paying for a crisis for which they are not responsible and instead start holding the class of exploiters to account.