The Guardian view on BHS: murder on the high street

http://www.theguardian.com/commentisfree/2016/apr/25/the-guardian-view-on-bhs-on-the-high-street

Version 0 of 1.

It’s BHS RIP. If not quite yet, then, after the move into administration on Tuesday, surely soon enough. The corporate obituaries almost write themselves. Cue headlines about “the way we used to shop”, pictures of brass pendant lights and easy-care checked shirts; memories of sausage ’n’ chips washed down with tea at the in-store cafe; and retail sector analysts sharing expertise about how out-of-town malls, e-commerce and supermarkets that peddle kitchenware have done for the all-purpose store on the high street. That B, standing for British, is another emblem of how anachronistic BHS had become – a throwback to a less individualistic era, when a shop could sell itself as a national champion. To sum up the easy story here, time’s tide has simply washed BHS away.

But the suggestion this account carries – that the 11,000 staff now facing the future with dread are the inevitable victims of unavoidable change, people for whom nobody was ever going to be able do all that much – needs to be challenged. For the reality is that, even if the retail aspect of the BHS story strikes a dated note, the financial dealings behind the scenes are bang up to date, typifying the ugly realities of the modern British way of doing business. In recent weeks, the Guardian has highlighted what happened after aggressive and footloose finance acquired one trusted name on the high street, Boots, in 2007. Its stores were weighed down with mighty debts, and then the liabilities serviced by sweating the staff and maximising payments from the NHS, whether or not its patients needed the services billed for. Like Boots, BHS always used to be seen as dependable and unexciting. Like Boots, too, fate was to match it with a proprietor who was neither of these things, and rather earlier in the BHS case.

Sir Philip Green, as he wasn’t yet styled, acquired BHS right back in 2000, and was soon being reported as having chalked up the fastest £1bn in business history. After the Guardian tasked an experienced journalist and qualified auditor with casting an eye over the books in 2003, to ascertain where the value had come from, the tycoon’s raging response over the telephone mixed expletives, dismissal of his scrutineer for being Irish, and an insistence that his numbers were beyond challenge because they were blessed by the investment bankers who sat on his board. Like any business in a changing environment, retailers require investment to retain their relevance. But the most striking feature of the early Green years was the distribution of £400m in dividends to the businessmen’s Monaco-based wife, extracting value of around double the original price he had paid for the shop.

The later Green years were characterised by drift on the shop floor, which proved to be lethal when it became coupled to unmanageable pension debt. The retail impresario had inherited a company pension scheme in financial balance, and well after the widespread and damaging pension “contribution holidays” of the 1990s, when it was assumed that exceptional investment returns would last for ever. But what was paid into the BHS scheme over the course of the noughties proved to be entirely inadequate to weather the financial storm of 2008-09. Now, a few years later, with interest and annuity rates still stuck on the floor, the cost of paying the pensions looms ever larger. With a regulator probing, we wait to see if Sir Philip will cough up more. Either way, he decided last year that he wanted out of BHS at, quite literally, any price, selling the business to an inexperienced, two-time bankrupt for £1 in March 2015.

Whatever Dominic Chappell has spent the last year doing – and he seems to have been busy enough with cutting deals to reduce its rent, and, the Guardian understands, paying more than £25m in management fees, interest fees and other costs to his holding company – BHS’s staff have not seen much evidence of any serious strategy to give their company a sustainable future. Indeed, things have now reached the pass where Sports Direct – a firm renown for controversial, cut-price hiring practices, and a potential purchaser of some of the stores – begins to look like a guardian angel.

As the government-run Pension Protection Fund prepares to rescue the BHS pensioners, the familiar mismatch between private profits and public losses is in evidence once again. Meanwhile, hollowed-out husks could soon blight 100-plus high streets, yet another story of common space being disfigured after private greed enjoyed free reign. And a community used to being fleeced could be left with another nasty outbreak of British heist sores.