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What’s been happening in the commercial world this week? Read on to find out!
This week, online fashion retailer Boohoo bought Arcadia Group’s Dorothy Perkins, Wallis and Burton for £25.2m. Only 260 jobs will be moving with the brands, largely head office roles such as buying, merchandising and digital operations. This means that 2450 jobs will be lost. Furthermore, none of the three brands’ 214 stores have been bought and these will permanently close. Boohoo plans to fully integrate the brands by May. The news comes, only weeks after the company bought Debenhams brand and website for £55m, and a few months after purchasing Oasis and Warehouse for £5.25m.
January also saw the purchase of Topshop and Topman by online giant Asos, further cementing digital retailers as the great disrupters in fashion. This also marks the final sell-off of the Arcadia Group.
What happens now to Arcadia’s creditors?
Administrators Deloitte reported that they have raised more than £500m from selling Arcadia’s assets. Most of this will be distributed to Arcadia’s creditors. This includes a £50m payment to Sir Phillip Green and his family as a payout from an emergency restructuring interest-free loan made in 2019 through Aldsworth Equity.
More than 1500 suppliers and landlords are expected to get less than 1% of the money owed to them. 1155 entities are owed money from Topshop and Topman alone. At least a further 700 unsecured creditors are attached to other Arcadia Group chains, notably Dorothy Perkins and Burton.
It is unclear the extent to which Arcadia’s debts surpass the estimated £750m. Clarification is needed over tax owed to HMRC as well as the Group’s pension fund.
Talking point: In the event of liquidation, who is paid first? What are the advantages and disadvantages of being a secured or unsecured creditor?
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This week, it was revealed that the UK Treasury is considering a new online sales tax to address the disparity between tax paid by physical retailers and those who operate purely digitally.
Businesses are split over the new tax. The British Retail Consortium opposed the move with a statement that, despite the huge problem of dying high-streets, shoppers should not be hit, anywhere, with higher costs at a time of economic weakness.
One particular company used to highlight this is Amazon. Amazon’s tax to turnover ratio is just 0.37% whereas a traditional brick-and-mortar retailer can expect to pay upwards of 2.3%. However, Amazon has been historically defensive over its UK tax payments. Recently, a spokesperson reminded the Consortium that the e-commerce company has invested over £23bn in the UK since 2010. This created 10,000 new jobs in 2020 alone. In January, the company announced a new programme, offering 1000 apprenticeships. If the tax Amazon paid in 2020 is broken down, it comprises £293m on their £3bn UK-based sales, as well as £854m in indirect taxes. Other companies that will be most drastically affected include Asos and Ocado, who have both, like Amazon, thrived during the pandemic from a huge increase in online sales.
Tesco, Asda, Morrisons, Waterstones and B&Q have all advocated for the online sales tax, warning that the high business rates burden on shops, twinned with the economic effects of the pandemic, will lead to many more closures in the coming months. Tesco has been a long-term proponent of the calls, after suggesting a 2% online sales tax in 2019. They have since revised this to a 1% online sales tax for companies with annual revenues in excess of £1m.
Talking point: Should Amazon pay more tax? What do you think about the new online sales tax?
Tesla had an outstanding 2020. Read our article to see why. However, the electric vehicle manufacturer has had a rocky start to 2021, with Chinese officials calling into question the quality and safety of the latest model. Allegations concern battery fires and malfunctioning touch screens. After the US, China is Tesla’s largest market, with around 120,000 cars sold in 2020. China is also the world’s largest car market is the use of electric vehicles has been staunchly promoted by the Chinese government. Therefore, the Shanghai factory is instrumental to Tesla’s success.
Despite Tesla’s current market dominance, it is important to remember that China has some homegrown talent in the EV field, notably Nio and XPeng.
Taling point: Given the vastly accelerating EV industry, it is important to stay on top of developments to stay commercial aware. What measures/decisions has President Biden made to promote EV? In the UK, what is the government doing in this industry?
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