Poundland's 12,000 Staff Face Years Out of Work If Chain Collapses

Poundland's 12,000 employees could be out of work for years if the retailer collapses, founder Steve Smith warned, as he called on the chain's owners to accept a proposed buyout rather than break the business apart.

Smith, who set up the firm with a single store in Burton upon Trent in 1990, said: "Once these jobs are lost, they are lost" from Britain's struggling high streets. His warning lands as staff face uncertainty over their future in the run-up to Christmas.

The chain's fate hangs in the balance after the retailer, controlled by the US restructuring specialist Gordon Brothers, filed a notice of intention to appoint administrators at the high court on Thursday. The advisory firm AlixPartners is lined up to run the process.

What does the legal filing actually do?

The filing protects Poundland from the demands of creditors until 12 November while a solution to its problems is sought. But the odds of avoiding mass store closures and job losses shrink by the day: suppliers have held back on deliveries, hurting the retailer's ability to trade.

Poundland's management is scheduled to meet Kate Dearden, the minister for the future of work, on Wednesday. Political pressure is mounting on Gordon Brothers to accept an offer from Northern Ireland's Martin Property Group rather than calling in administrators to break up the retailer.

The restructuring firm is understood to believe it can raise more from a breakup of Poundland than through the Martin offer.

Why is the founder pushing the deal?

Smith sold his final shares in Poundland for £250m in 2006. He said he was prepared to support the Martin offer but the property group did not need his cash.

"It was my baby," he said. He had put in an offer when Poundland was first put up for sale but never heard back, and he said it was too late to launch his own bid now.

"If they have got offers on the table, why is Gordon Brothers not taking it and saving all these people? Retail is hard out there and if these people lose their job it could be a couple of years before they get jobs again. They work week to week and need their wages," Smith said.

His concern runs well beyond the shop floor. "It is not just 12,000 jobs. Poundland has more than 2,000 suppliers, some only deal with Poundland and some employ hundreds of people."

He suggested as many as 30,000 jobs could be at risk across Poundland's supply chain, stores and other affected businesses on high streets around the country.

"Poundland brings in 4 million to 5 million customers every week to towns and shopping centres and retail neighbours are going to suffer as well," Smith said.

In his view, the business itself is no longer the problem. "Now it has been restructured and is turning a corner and starting to do well."

What is on the table?

Talks continue about a potential deal under which Martin Property Group has offered about £7.5m up front, plus the same again in deferred payments over the next two years.

That would pay off only half the £30m shareholder loan, the majority of which was taken on by Gordon Brothers when it bought the company. The deal would also include taking on a further, asset-backed loan worth about £90m, it is understood.

Gordon Brothers has rejected the deal — even though Pepco, a former owner of Poundland that holds the other £7.5m of the debt, is prepared to wait for repayment in the hope of saving the business, as first reported by Sky News.

Gordon Brothers has been approached for comment.

What happens next?

The clock now runs two ways. Administrators wait behind the 12 November creditor shield, while Smith, Pepco and political figures push Gordon Brothers to take the £7.5m-plus-deferred offer before a breakup wipes out the chain instead. Whichever path wins, the decision lands before Christmas — with 12,000 pay packets and an estimated 30,000 wider jobs riding on it.

By Grace Kim