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When do worker numbers count as ‘too big to fail’? Sussex retail expert on BHS demise

Dr Ödül Bozkurt

“BHS didn’t get its offering aligned right,” says a retail employment expert in the Business and Management department at the University of Sussex.

The high-street chain has filed for administration today (25 April), threatening almost 11,000 jobs.

And with over 20,000 current and former BHS staff waiting to hear what happens to their pension, Dr Ödül Bozkurt asks: “When do worker numbers add up to count as ‘too big to fail’?”

BHS will continue to trade while administrators try to find a buyer for all or part of the 88-year-old business.

The retail giant has seven shops in Sussex including a flagship store at the Churchill Square shopping centre in Brighton as well as others in Chichester, Crawley, Eastbourne, Hastings, Horsham and Worthing.

Dr Bozkurt, Senior Lecturer in International Human Resource Management in the University’s School of Business, Management and Economics, says: "It had been known for a long time that BHS was struggling, and the way the Arcadia Group ‘dealt’ with this was by getting rid of it for a pound just over a year ago.”

BHS was bought for £1 last year by a consortium called Retail Acquisitions, from retail entrepreneur Sir Philip Green, the owner of the Arcadia retail empire.

Dr Bozkurt says: "As everyone says, online retailing has put brick and mortar alternatives in the UK high street under increasing pressure. There are also difficulties with the department store format as compared to specialist retailers as consumers ‘mix and match’ high and low cost retail offers.

"But on their own these are not grounds for failure - in fact, the more successful retailers have managed growth despite the difficulties, often through rapid transnational expansion, over the past decade. Topshop within the Arcadia Group is a good example of that trajectory. In a comparable format, John Lewis has its profit growth ambitions often thwarted but overall remains robust.

"BHS obviously didn’t get its offering aligned right – the traditional four Ps of product, price, place, promotion didn’t quite come together in a coherent way. And so the business fails, and it’s hard to say anyone will be hugely surprised.

"What concerns me is that, when this scenario is portrayed as a natural and indeed inevitable outcome of how business works, past and present workers are only seen and talked about as a liability. You can see national media toeing this line since the news this morning.

"Retail jobs are already precarious enough, with few if any alternatives in many locations in the UK, especially for certain groups of workers like women with care responsibilities or those with few formal qualifications. 11,000 workers out of a job and over 20,000 waiting to hear what happens to their pension - when do worker numbers add up to count as ‘too big to fail’?

Dr Bozkurt’s question refers to the theory that certain corporations, including financial institutions such as banks, are so large and so interconnected that governments must support them in a crisis because of the potential impact on the wider economy.

Dr Bozkurt adds: ""Even more grating for many will be the obvious impunity, in fact the improved fortunes, of those who, having been in positions to make the decisions, have failed to make the business work. ‘Improving’ group performance by offloading unprofitable businesses is at best gimmickry, rather than good management.

"The pay raise of nearly 40 per cent given out to top management in the Arcadia Group after dropping BHS and Sir Philip Green’s fairy tale wealth and lifestyle are all too visible and painful to watch for those who are possibly without a job or looking at a reduced pension from today."

BHS has debts of more than £1.3 billion, including a deficit in its pension fund of £571 million. Sir Philip is reported to have offered £80 million towards the cost of BHS pensions, though the regulator could pursue further payment from the retail billionaire.

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Posted on behalf of: School of Business, Management and Economics
Last updated: Monday, 25 April 2016