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Sir Philip Green must sort out the BHS pension mess Sir Philip Green must sort out the BHS pension mess
(about 4 hours later)
Sympathy for BHS’s 11,000 staff deepens when you read how Dominic Chappell, boss of owner Retail Acquisitions, finished his farewell email to staff. “I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget,” he writes, crassly missing the required tone. No, Mr Chappell, BHS was never a “project” for the staff. It is how they earned their living and made plans to fund their retirement. Sympathy for BHS’s 11,000 staff deepens when you read how Dominic Chappell, the boss of its owner Retail Acquisitions, finished his farewell email to staff. “I would like to say it has been a real pleasure working with all of you on the BHS project, one I will never forget,” he writes, crassly missing the required tone. No, Mr Chappell, BHS was never a “project” for the staff. It is how they earned their living and made plans to fund their retirement.
Related: BHS collapses into administration as rescue deal failsRelated: BHS collapses into administration as rescue deal fails
On one point, though, Chappell was correct. BHS was “always going to be very, very hard to turn around.” It is an under-invested, loss-making chain in a corner of a tough retail market where the death of the department store was being debated even before internet shopping arrived. Dutch-owned C&A, remember, pulled out of the UK as long ago as 2000; it would be hard to say it was mourned for long. On one point, though, Chappell was correct. BHS was “always going to be very, very hard to turn around”. It is an underinvested, loss-making chain in a corner of a tough retail market where the death of the department store was being debated even before internet shopping arrived. Dutch-owned C&A, remember, pulled out of the UK as long ago as 2000; it would be hard to say it was mourned for long.
But – given the odds against the BHS “project” succeeding – there is an urgent question. How much responsibility for the £571m deficit in the pension fund lies with Sir Philip Green, who sold BHS to Chappell and his inexperienced crew for £1 a year ago. But given the odds against the BHS “project” succeeding, there is an urgent question. How much responsibility for the £571m deficit in the pension fund lies with Sir Philip Green, who sold BHS to Chappell and his inexperienced crew for £1 a year ago.
The answer is clearly not none. The principle is clear: former owners cannot wash their hands of a pensions problem simply by selling a business for a token sum. Even Green implicitly acknowledged as much when he offered the Pensions Protection Fund a £40m contribution plus a write-off of a £40m loan. The answer is clearly not none. The principle is clear: former owners cannot wash their hands of a pensions problem simply by selling a business for a token sum. Even Green implicitly acknowledged as much when he offered the Pension Protection Fund a £40m contribution plus a write-off of a £40m loan.
But £80m is plainly inadequate in the context of a £571m deficit. It also looks like small change when you recall that Green – or, strictly speaking, his wife – took £400m in dividends out of BHS in happier times. However, £80m is plainly inadequate in the context of a £571m deficit. It also looks like small change when you recall that Green – or, strictly speaking, his wife – took £400m in dividends out of BHS in happier times.
The Greens might argue that it was long time ago, and that the failure of BHS – at the point of sale last year – was not inevitable. Green anticipated the question at the time by insisting the sale was 100% clean. “If I give you my plane, right, and you tell me you’re a great driver and you crash it into the first fucking mountain, is that my fault?” he said. The Greens might argue that it was long time ago, and that the failure of BHS – at the point of sale last year – was not inevitable. Green anticipated the question at the time by insisting that the sale was 100% clean. “If I give you my plane, right, and you tell me you’re a great driver and you crash it into the first fucking mountain, is that my fault?” he asked.
But it’s not that simple. BHS’s fitness to fly was influenced – to some degree – by decisions taken under Green’s ownership. That’s not just about dividends. Property transactions and the plan to address the pensions deficit after the 2012 triennial review are also relevant. But it’s not that simple. BHS’s fitness to fly was influenced, to some degree, by decisions taken under Green’s ownership. That’s not just about dividends. Property transactions and the plan to address the pensions deficit after the 2012 triennial review are also relevant.
There is also, to follow Green’s metaphor, the small matter of who you entrust with a plane carrying 11,000 staff and 20,000 pensioners. Chappell is a former bankrupt. In trying to rewire BHS, he was attempting a task that had defeated Green himself. Nobody should be surprised that Retail Acquisitions failed to secure the necessary finance. There is also, to follow Green’s metaphor, the small matter of who you entrust with a plane carrying 11,000 staff and 20,000 pensioners. Chappell was formerly bankrupt. In trying to rewire BHS, he was attempting a task that had defeated Green. Nobody should be surprised that Retail Acquisitions failed to secure the necessary finance.
For all those reasons, the pensions regulator should put the maximum squeeze on Green, if necessary. The Pension Protection Fund is funded by a levy on other final-salary schemes so any shortfall would rebound elsewhere. Indeed, the credibility of a scheme born as a reaction to past scandals like Maxwell depends on the outcome at BHS being seen to be fair and reasonable. For all those reasons, the Pensions Regulator should put the maximum squeeze on Green, if necessary. The Pension Protection Fund is paid for by a levy on other final salary schemes, so any shortfall would rebound elsewhere. Indeed, the credibility of a scheme born as a reaction to past scandals such as Robert Maxwell depends on the outcome at BHS being seen as fair and reasonable.
What that means in terms of hard sums can only be described once the administrator has gone to work and a precise pension shortfall can be defined. In the meantime, though, recall Green’s own farewell message when he sold the business. “I am deeply proud of the work ethic displayed by the very many people I have worked with for so long at BHS, both within our head office and across the stores,” he said. What that means in terms of hard sums can only be described once the administrator has gone to work and a precise pension shortfall can be defined. In the meantime, however, recall Green’s farewell message when he sold the business. “I am deeply proud of the work ethic displayed by the very many people I have worked with for so long at BHS, both within our head office and across the stores,” he said.
He now has a chance to express his gratitude in more than words. Prepare to dig deep, Sir Philip: forget Topshop, the yachts (a new 300-footer is on the way), the fashion academy and the knighthood. Your contribution to retailing will be remembered chiefly by the decency, or otherwise, of your behaviour towards BHS pensioners.He now has a chance to express his gratitude in more than words. Prepare to dig deep, Sir Philip: forget Topshop, the yachts (a new 300-footer is on the way), the fashion academy and the knighthood. Your contribution to retailing will be remembered chiefly by the decency, or otherwise, of your behaviour towards BHS pensioners.
Saudi Arabia will do well to end its ‘addiction’ to oil
The first step towards overcoming an addiction, they say, is recognition that there’s a problem. In Saudi Arabia’s case, the malaise is obvious – the huge budget deficit that has followed the fall in the oil price. Ending the “addiction” to oil, as asserted by Prince Mohammed bin Salman, would have been a better idea a few years ago when the oil price was higher, but there’s no time like the present.
One difficulty lies in believing that the transformation can be achieved quickly: the deputy crown prince even talked about four years. Less than 5% of Saudi Aramco, the state oil company, will be sold initially, so this is a strategy in cutting down, rather than quitting abruptly. Given that Aramco could be worth $2tn (£1.38tn), that’s probably the only viable approach.
The hardest part, though, may be meeting buyers’ expectations for transparent information. A “normal” oil company is expected to publish an audited profile of its reserves. Is Saudi Arabia really prepared to display information currently regarded as a state secret?