The High Street Cash Crisis: Dispatches

Category: News Release


With Britain’s High Streets facing a fight for their future, an investigation by Dispatches asks who is really to blame for the collapse of many of the country’s best-known retailers.

Debenhams, Cath Kidston, Toys ‘R’ Us, Poundworld, Maplin and TM Lewin are among the retailers who have largely disappeared from our high streets in recent years. Many have pinned the blame on the pandemic and the rapid rise of online shopping while others have pointed to high business rates and rents.

But Dispatches reporter Antony Barnett probes behind the stories of a number of these failed brands and discovers they all have one thing in common – they were all once owned by private equity firms.

While these types of investors can sometimes be a lifeline for struggling businesses by offering a vital source of cash, the programme hears from critics who accuse them of focusing too much on short-term profits and loading companies with debt. This, they argue, starves them of investment or funds to react adequately to shocks such as coronavirus or rapidly changing retail fashions.

Dispatches has studied the accounts of private equity firms behind 10 well-known high street retailers that have foundered in the past three years.

  • The 10 companies are Debenhams, Poundworld, Toys ‘R’ Us, Maplin, Casual Dining Group, Azzuri Group, Cath Kidston, Byron Burger, TM Lewin, and HMV.

·       Documents reveal that almost 29,000 jobs were lost when they entered administration or liquidation.

  • Their private equity owners made nearly £1bn in profits from their broader portfolio of investments during the period they owned these failing brands.

In addition to the human cost of those that have lost their jobs, the programme also discloses that business closures of these private equity-owned retailers have had a huge impact on the taxpayer:

  • These 10 brands, together, owed almost £50million to HMRC at the point of collapse.
  • When Cath Kidston went under, the Government’s Insolvency service, a taxpayer funded body, had to pay £1million to cover staff redundancy payments.

Lord Prem Sikka, Emeritus Professor of Accounting at the University of Essex, noting that HMRC was an unsecured creditor until December 2020, said:, “HMRC would be lucky to get two or three pence to the pound, and the net result is that it’s the taxpayer who bears the loss... The people who are really suffering are the supply chain creditors, employees, pension schemes, HMRC and local councils.”

John Caudwell, founder of Phones4U, calls for change:

John Caudwell, the billionaire businessman who founded mobile retailer Phones4U in the nineties, sold his business empire to two private equity firms for £1.5billion. Yet despite doing very well from private equity he believes there is a need for legislation to stop these companies taking so much money out of retailers.

Caudwell told Dispatches: “I think private equity is an absolute, absolutely vital part of corporate structures and corporate financing it gives an owner, developer, the opportunity to sell to a different set of people.

Private equity are often wanting to take their cash out as quickly as possible. To protect their own position by doing that.

“Maybe the legislation could be changed so that they don't strip, they're not allowed to strip quite the same amount of money out from the business. Some way of making the private equity keep more skin in the game, keep the business protected would be a good thing.”

Debenhams case study:

Debenhams workers, some of whom worked for the company for 43 years, noticed a sharp decline in the company after they were bought by a private equity consortium in 2003.


The owners sold off 23 Debenham’s stores in 2005 – which netted almost half a billion pounds. but Debenhams had to lease these stores back from new landlords on 30 year plus deals. Critics say these expensive leases and the debt accrued under private equity ownership impacted on the long-term health of the company. 

The private equity consortium reportedly paid themselves dividends of £1.3billion and the man they put in charge, Robert Templeman, received £8million in pay while he was Chief Executive between 2003 and 2011. In addition, Templeman is thought to have held millions of pounds’ worth of Debenhams shares.

In a statement, Mr Templeman said, Throughout my time in charge, Debenhams was a profitable and highly cash generative business that consistently grew market share...we invested c£980 million...including funds for a large store refurbishment programme...and for the launch of a new online platform. The investment...positioned Debenhams as one of the UK top ten retailers in the fashion and home sector...we also reduced debt from c£1.1 billion to £384 million in 2011…


“When I left almost a decade ago...the business had just delivered strong results…[The results]...were considered by investors, the City and most of the financial press to be a strong performance…”


At the time of going to press TPG , one of the key private equity firms that owned Debenhams , declined to provide a statement for broadcast but they have indicated they were not responsible for the demise of Debenhams, which occurred over 10 years after their joint ownership and that during their involvement TPG were not in day-to-day management of the company or stores.  They claim that issues after they disinvested - such as management decisions, changing consumer habits and the pandemic were reasons why Debenhams ended up in liquidation.  TPG also point to reports of record sales and profits in 2005 as evidence of Debenham’s health and that overall TPG profits in this period cannot be seen as profits made at the expense of Debenhams.  


Poundworld case study:

Poundworld was opened by Chris Edwards and his son. With rock bottom prices, they were successful on the high street, quickly opening over 300 stores. In 2015, a private equity firm offered them £150million for the business.


Founder, Chris Edwards tells Dispatches, “Everything changed…. They devalued all that brand… all they did was disorientate their own staff, disorientate the customers and that led to its demise.”

Angry at the new management Mr Edwards left Poundworld a year later. In 2018 the chain collapsed, costing over 5,000 jobs.


Poundworld ‘s owner from 2015 was TPG, one of the key players in the Debenhams takeover 15 years earlier. TPG have not disclosed what they made or lost on Poundworld, but members of its European arm -TPG Europe LLP, which operates a broad range of investments - shared between them profits of almost £100million pounds in the years they owned Poundworld. Its highest paid member took home more than £6million.


TPG have denied the decisions they took contributed to the decline of Poundworld. They claim it was a successful and profitable business, and despite investment it was affected by industry wide factors such as declining footfall and increased costs. TPG say they were also not involved in the day-to-day management of the company such as decisions about pricing and that the management were paid in according to their experience and responsibilities  


Cath Kidston case study:

Cath Kidston had grown from a small home furnishing store in West London into a major international brand, achieving sales in excess of £100million a year.


As the business grew it passed between private equity owners, the latest, Baring Private Equity Asia, took over in 2016.


Former staff member Charlotte told Dispatches, “As more products are coming in the prices were increasing, the quality was decreasing and we did have quite a fair few people returning… the clothing was shrinking when it was being washed.”

  • When Baring Private Equity Asia took control of Cath Kidston it was already loss making. But two years later those losses had more than doubled.
  • Baring Private Equity Asia appears to have lost in the region of £180million on its investment in Cath Kidston.
  • Chief Executive and Founding Partner of Baring Private Equity Asia Jean Eric Salata’s personal wealth appears not to have suffered. Forbes estimates that, today, Salata is worth in excess of £1.5bn.

Martin Lindstrom, Founder of Lindstrom Company, was brought in by Cath Kidston’s owners at the 11th hour to try to rescue the company,


“It definitely was an 11th hour play; I have to tell you. And to the credit of Baring, they actually believed that there was something around the brand which had to be fixed. In most cases, I have to tell you, private equity companies wouldn’t even care about the brand.”


Frankly speaking, I think one of the key problems is two fundamentally different mindsets. Private equity almost by nature is short-sighted. They want to flip the brand after a couple of years and hopefully double their return… And so what’s the easiest path, to milk the brand. And that is to make sure we cut the quality, make sure we cut the staff, make sure you increase the prices if you can do that. You stretch the brand as much as you can… and suddenly that whole brand, which had taken years and years to establish will be destroyed overnight.


Baring Private Equity Asia said, “…we invested significantly in...[Cath Kidston and]…completely eliminated its bank debt. Unfortunately, COVID-19 had a catastrophic impact…the board…took the difficult decision to close the retail store network to ensure the long-term survival of this iconic British brand. Regrettably, this resulted in the loss of many jobs. The business is now achieving encouraging sales growth in the UK and overseas.”  


The High Street Cash Crisis: Dispatches, Monday 22nd March, Channel 4, 8pm

ITN Productions

Reporter: Antony Barnett

Produced and Directed by Alasdair Glennie