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Poundworld set to become latest retail failure, putting 5,100 jobs at risk

More than 5,000 jobs are at risk at Poundworld.
More than 5,000 jobs are at risk at Poundworld.

Poundworld is set to become the latest retail casualty on the British high street as it calls in administrators, putting 5,100 jobs at risk.

The budget retailer is poised to appoint Deloitte to handle an administration after last-ditch rescue talks with R Capital broke down over the weekend.

Poundworld, which is owned by TPG Capital, has around 350 stores. Its possible collapse comes after both Toys R Us and Maplin fell into administration earlier this year.

Read more: Poundworld to appoint administrators putting thousands of jobs at risk

It is understood that TPG and Poundworld's management rejected offers to buy the business out of a pre-pack administration, and were hoping to sell it as a solvent business.

Other parties named as possible buyers were turnaround specialist Alteri Investors and Poundworld's founder Chris Edwards.

But a deal could not be struck.

Poundworld's losses widened in 2016-17 to £17.1 million, from £5.4 million of losses the year before.

The retailer's move would come just days after House of Fraser detailed its plans to shut 31 stores, affecting around 6,000 jobs.

House of Fraser is seeking landlord approval for the restructuring plan, which is a form of insolvency known as a Company Voluntary Agreement (CVA).

A raft of CVAs have been struck in recent months as retailers struggle amid surging costs, rising business rates, competition from online rivals and a slowdown in consumer spending.

Other retailers undertaking CVAs in a bid to keep trading include New Look, Mothercare and Carpetright.

Restaurant businesses have also been seeking to cut their costs with store closure programmes, with Carluccio's, Byron and Prezzo all pushing through CVAs this year.

Dave Gill - Usdaw National Officer says: “Poundworld staff are deeply concerned about their jobs after the company failed to secure a rescue package. We are seeking urgent talks with the administrators to represent the best interest of our members and urge them to find a buyer for the company.

“Regrettably Poundworld do not recognise Usdaw and they have not been keeping us informed of developments. We are hopeful that the administrators will engage with us to help save jobs. We welcome Deloitte’s initial approach for Poundworld to continue to trade while a buyer for all or part of the business is sought and that there are no redundancies or store closures at this time.

“Usdaw is providing the support and advice our members require at this very difficult time and we expect the administrators to ensure all staff are treated with dignity and are fully consulted.”

Professor Lawrence Bellamy, Academic Dean, Faculty of Business, Law and Tourism at University of Sunderland, also commented on the administration.

He said: “Retail spending has continued to shift from ‘bricks and mortar’ to online and the UK is now the third largest e-commerce market in the world with Amazon, Tesco and Argos (now part of Sainsbury’s) leading the sales positions.

"Aside from economic factors much of this shift has been driven by over 40 million smart phone users, making online purchasing so convenient.

“The discounters did well on the back of the financial crisis but 10 years on the position has continued to change and supermarkets have responded to protect their market share.

"Whilst this won’t stop people using Aldi and Lidl who are now well established and presenting an improved offer, some of chains, even in the budget sector, are suffering. Poundworld has seen two years of losses after previous years of expansion.

"They have tried to respond with an individual pricing strategy and online activities but it could be argued that there is an oversupply in retail and as one of the budget brands they have suffered more with tight margins, expansion, the financial context and image.

“A stripped down company network model may be suitable for acquisition, as no doubt there are still a number of stores in the chain which are viable, but there is also the issue of purchasing power and getting the best deal on a smaller operation may not be quite as easy.”

Here is a list of the Poundworld stores in the North East:

Cleveland Bargain Buys

Middlesbrough Bargain Buys

Newcastle

Sunderland Bridges Shopping Centre

Sunderland

Cramlington Bargain Buys

Washington

Newcastle Wallsend

Gateshead

Cleveland

Newcastle Byker

Durham

Killingworth

Darlington

South Shields

Newton Aycliffe

Middlesbrough

Jarrow

Stockton

Blyth Bargain Buys

North Shields

Seaham

Blyth

Cramlington Manor Walks