Poundland owners issue update on store closures — what will happen to shops and jobs?

The future of high street discount store Poundland is still to be determined, with owners Gordon Brothers saying “all avenues” are being pursued to protect jobs and value.

While the parent firm appointed administrators for Poundland last week, the outlook remains far from certain for stores and employees alike.

Here, The Independent takes a look at what the future might hold for Poundland.

What’s the latest from Poundland?

The process isn’t a quick one and there are plenty of potential outcomes, given several interested parties had previously been credited with an interest in buying the brand.

A spokesperson at Gordon Brothers said on Thursday: “We are pursuing all avenues through the sale process to find a solution which protects as many jobs as possible and preserves value. Work continues at pace, engaging in active discussions on offers with interested parties.

“We recognise the Poundland business has faced several years of instability. When Gordon Brothers acquired the business, it was in distress and required a radical restructure, urgent operational change and significant funding, which we provided to support the company’s ability to trade.

“In spite of our efforts and the tremendous efforts of management to deliver a turnaround, the business remains challenged and vulnerable to any potential downturn in future trading.

“Our intent throughout the comprehensive sale process has been to protect as many jobs as possible and preserve value in order to deliver the best available outcome for the people, creditors and local communities who care about this business as much as we do.”

All that is undoubtedly a reasonable summation of events which have led to this point, but it leaves those working, or indeed shopping, at Poundland none the wiser as to what is next.

What could it mean for stores?

In theory, a discount store should be thriving when consumers are being cost-conscious due to other pressures, such as rising energy bills.

Indeed, Poundland’s own updates had suggested a return to profitability was on the agenda.

“It does seem counter intuitive that a discount store appears to be heading for administration as the country remains midst of a cost-of-living crisis,” said Sean Moran, insolvency partner at law firm Shakespeare Martineau .

“Gordon Brothers has rolled the dice and will be hoping that the administration can achieve a more favourable outcome, perhaps through a pre-pack sale of all or part of the business, than trading on in its current guise.”

A pre-pack is essentially an agreement prior to going into administration, which can then be rapidly completed. It allows the company to continue trading so they don’t lose suppliers, customers and so on. But it can mean any buyers pick and choose the parts they want.

Therefore some stores or brands might be kept while others are discarded, some jobs could be transferred while others are not, and so on. Those which are not kept become part of the company in administration, which can include creditors owed money.

What could it mean for jobs?

In terms of the employees at Poundland, they likely face a similarly lengthy process to discover their fate, both in terms of jobs and potentially payment.

Much could depend on the type of agreement that Gordon Brothers eventually come to with either administrators or interested parties, but there are some protections in place to aid them receiving anything owed, says Andrew Watling, a partner at Opus Restructuring and Insolvency.

“Those who are at risk could suffer potential initial delays in getting any money due to them; the company is unlikely to pay out a redundancy package and it could also depend when they were paid up to [so far],” Mr Watling told The Independent.

“The Redundancy Payment Service (RPS) deals with any claims employees have – wages, redundancy, notice, holiday pay. The employee would apply there for any money they’re owed – it’s funded by National Insurance contributions. Up to certain statutory limits, they’ll be able to pay out where applicable.

“So they will get paid quicker but not necessarily all money owed to them.”

The RPS is part of the government’s Insolvency Service, with arrears of pay of up to eight weeks unpaid wages and six weeks of holiday pay included in what can be claimed for.

And in terms of future jobs, there’s even less clarity. A pre-pack agreement could involve the transfer of some sites, and thus jobs, but not others.

“There will be sites within the estates that are premium and people will want them – other sites won’t be as popular and therefore more at risk of proper closure,” added Mr Watling.

“For the employees, they are almost hostages of the circumstances and inevitably there could be some redundancies.”