Lisa Wilkinson: I’m devastated and sorry over collapse of Wilko
That’s a long list of failures, Liam Byrne MP points out, and one that has left the taxpayer on the hook for over £40m in redundancy payments, a £50m hole in the pension scheme, and creditors getting 4p in the pound, at best, on their loans.
Q: Will you apologise to workers who are facing a Christmas without work?
Former chair Lisa Wilkinson says she is thankful to many people who supported Wilko, including the “fantastic team members” who always worked there, “amazing suppliers and advisers” and Wilko’s “fantastic customers” over the last 90 years.
Wilkinson (who was singled out for criticism over ‘weak leadership’ by the GMB this morning) tells the committee:
I am devastated that we have let each and every one of those people down, with the insolvency that Wilko has done.
Wilkinson says she can’t put into words how sad she is that Wilko “let down all our customers, all our team members, our suppliers, our advisers”.
Genuinely, I don’t know what you want me to say….
Byrne says he was looking for the word “sorry”, which we haven’t heard.
Wilkinson insists she is sorry, adding:
I am sorry that we are not there supporting all those people any more.
Key events
Lisa Wilkinson is then asked what mistake she personally made as Wilko’s chair, that led to its collapse.
Wilkinson says she asks herself all the time what she would do differently if she had the chance.
And there are three things….
She says she should have been more proactive in 2022. At the start of that year, Wilko had positive cash, decent trading sales, no debt – but in each four-week period, cash was eroded.
Second, she wishes she’d brought Mark Jackson in as CEO earlier (he was appointed in December 2022)
Thirdly, Wilkinson wishes she’d taken the advice of PwC earlier.
Lisa Wilkinson: I’m devastated and sorry over collapse of Wilko
That’s a long list of failures, Liam Byrne MP points out, and one that has left the taxpayer on the hook for over £40m in redundancy payments, a £50m hole in the pension scheme, and creditors getting 4p in the pound, at best, on their loans.
Q: Will you apologise to workers who are facing a Christmas without work?
Former chair Lisa Wilkinson says she is thankful to many people who supported Wilko, including the “fantastic team members” who always worked there, “amazing suppliers and advisers” and Wilko’s “fantastic customers” over the last 90 years.
Wilkinson (who was singled out for criticism over ‘weak leadership’ by the GMB this morning) tells the committee:
I am devastated that we have let each and every one of those people down, with the insolvency that Wilko has done.
Wilkinson says she can’t put into words how sad she is that Wilko “let down all our customers, all our team members, our suppliers, our advisers”.
Genuinely, I don’t know what you want me to say….
Byrne says he was looking for the word “sorry”, which we haven’t heard.
Wilkinson insists she is sorry, adding:
I am sorry that we are not there supporting all those people any more.
Mini-budget chaos scuppered Wilko loan deal, MPs hear
Lisa Wilkinson then explains that Liz Truss’s mini budget scuppered Wilko’s attempt to move from a revolving credit facility to a secured lending facility in 2022.
She reveals Wilko was negotiating a deal with Macquarie Bank, but the interest payments on that loan were hiked massively in the mini-budget turmoil, she says.
Turning to other cause of Wilko’s collapse, she says financially, revenues were falling faster than costs could be cut.
Wilko also lost the confidence of key allies, including its bank, Lloyds, and its credit insurers, who both pulled away in 2022.
And it didn’t get enough support from enough suppliers (although some were very supportive).
Customers have gradually reduced their spending at Wilko, Wilkinson points out – for reasons such as the failure to scale up the business, the cost of living crisis, product availability problems due to driver shortages.
Wilkinson says Wilko’s customer proposition, against the budget retailers, was ‘unclear”.
She also points to the pressure on profit margins, spiralling costs, expensive high street rents, and Wilko’s weak processes and infrastructure.
Lisa Wilkinson denies her greed bankrupted Wilko
Committee chair Liam Byrne starts by asks Lisa Wilkinson why the retailer she chaired collapsed this year.
Q: Did your greed bankrupt Wilko?
“I don’t believe so, no”, replies Wilkinson softly.
Q: Why did Wilko collapse?
Wilkinson explains that , in essense, Wilko ran out of cash.
There were many contributory factors that led to that, she says, including the decline of the high streets, high rents, business rates, and Covid-19.
Wilkinson explains that Wilko stayed open during the pandemic, didn’t furlough staff, paid landlords in full during Covid, and only look advantage of business rates relief and the deferral to paying VAT (which has been paid off).
“There’s some debate about whether we should have done that, but we did”, Wilkinson adds.
Next up, the Business and Trade committee will hear from:
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Mark Jackson, former CEO of Wilko
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Victoria Venning, Partner, EY
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Andrew Walton, UK Head of Audit, EY
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Lisa Wilkinson, former Chair of Wilko
Q: What kind of Christmas are Wilko’s former staff facing?
Nadine Houghton, national officer at GMB, says Wilko staff would normally be looking forward to working with their colleagues this Christmas period.
Some staff have moved to B&M and Poundland, but many speak of a “loss of family”.
And Houghton criticises ex-chair Lisa Wilkinson for never apologising, or visiting a Wilko store or distribution centre to explain to staff what went wrong.
Houghton says she can’t understand that, if you’ve been part of a family business for such a long time….
Q: Was there a scenario under which Wilko could have survived?
Patrick O’Brien, global retail research director at GlobalData, says yes – if Wilko had started taking different decisions many years ago, including changing their store portfolio.
But, he says, many retailers are stuck in long leases, so often hope for the best.
O’Brien adds that there was “definitely an opportunity” for Wilko, given people are trading down in the cost of living crisis.
Restructuring expert David Steinberg, partner at Stevens & Bolton, is asked if the government’s proposals to reform the auditing sector are good enough.
Steinberg explains that the insolvency profession is self-regulated in the UK, with a number of professional bodies regulating insolvency practioners.
One of the proposed reforms had been that a single unitory regulator, the Insolvency Service, would be imposed instead.
But for that to make a difference, such a regulator would need to be properly resourced, Steinberg points out.
Steinberg says regulation does needs to evolve, so that firms are regulated rather than individual practitioners.
Wilko felt like a second family to its staff, the GMB’s Nadine Houghton says.
She explains that in the previous era of family ownership, before Lisa Wilkinson become majority owner, staff received good pay and conditions, and had more freedom on how they ran their stores.
They were trusted, and in that situation “both sides get to thrive”, Houghton says.
But in the event, over 12,000 staff lost their jobs when the company collapsed.
Q: If Wilko was bleeding so much cash in 2021-22 that Barclays was recalling its loan, and a gap was plugged by the last-minute sale of the distribution centre….. that doesn’t sound like a going concern, does it?
“Absolutely”, professor Atul Shah replies. He explains that it was “not very professional” for the auditors (EY) to delay signing off Wilko’s last accounts for six months, until that money from the distribution sale came in.
Shah says:
They should be willing to exercise judgement and take risk. Otherwise what is their job?
Wilko auditors ‘didn’t do their job’, MPs hear
Q: Why weren’t the problems at Wilko picked up by the auditors?
Professor Atul Shah, professor of accounting and finance at City University, says its a very good question.
He says PwC were the auditors up to 2019, when EY took over.
He says it shouldn’t be difficult to spot problems at Wilko, as while its turnover was high the margins were very low, and declining. That led to a £56m loss in 2018.
Shah says auditors have a duty to act in the public interest, and are trained to spot these kind of problems.
Q: So what went wrong?
“The auditors didn’t do their job,” Shah replies.
He points out that while the auditors said Wilko was a going concern, they cautioned that “however” they couldn’t guarantee the figure of the company due to the uncertained around it.
Q: Both sets of auditors – two members of the Big Four?
“Without any doubt,” Shah says. But, they phrased their audit reports carefully to protect themselves.
He adds that EY waited for nine months before signing off the last audited accounts, which is the maximum delay, because there were serious problems at the company.
Shah believes Barclays bank was calling for a £25m loan to be recalled.
The Wilko distribution centre at Worksop was sold the day before the accounts were signed off, Shah points out, providing a cash injection to keep the company running.
He argues that the auditors should have said the accounts did not give a full and fair view, and not just in 2021, at least three years earlier.
Q: Were the Willko board in denial, or did they not care?
Houghton pauses… then says the feedback from GMB members is that Lisa Wilkinson had an idea of about how to run the business, which was a “complete departure from what Wilko was and what it had done well”.
She cites a few examples…
First, the opening of a Wilko on Kensington High Street, of which Houghton says:
If that doesn’t speak to a vanity project, I’m not sure what does.
Second, an extension to the head office at an industrial estate in Worksop, which is “completely out of place”.
Third, an investment in a company developing driverless drones.
Q: When were unions first told there were problems at Wilko?
We were never directly told, GMB’s Nadine Houghton replies. The consistent message was that Wilko was in a strong cash position, and had a turnaround plan.
Houghton says GMB sought a meeting with Wilko’s then-CEO Jerome Saint-Marc in 2022, following press speculation about the business, and were again reassured. But only weeks later, Saint-Marc was replaced by Mark Jackson, who we’ll hear from later.
Houghton says Wilko’s management were warned in 2022 they should enact a CVA to bring their rents down, but the “inertia” at the company meant that didn’t happen.
She says the GMB were told by Jackson in January that Wilko’s rents were 40% over market rates, but that there was a turnaround plan.
Clearly as we know, it was too little, too late.
Houghton goes on to explain there was no transparency, or any humility at board level, when Wilko needed to realise the challenges it faces from rivals.
She explains that Wilko had been signalling to staff that it was seeking a John Lewis-type model.
Patrick O’Brien, global retail research director at GlobalData, says Wilko’s collapse was due to a “sense of inertia”, as the retail sector changed.
O’Brien tells MPs that Wilko was was doing well up to 2012, but struggled in the last 10 years up until its collapse this year. So it’s not simpy due to Covid-19, or the cost of living crisis.
They faced much stronger competition – partly from supermarkets, but also rivals such as Home Bargains and B&M who had a more compelling offer, plus competitors such as Dunelm. They were “attacked from all sides”, he says.
O’Brien explains:
It seems to me that Wilko had a sense of inertia. They didn’t really do enough.
They had the wrong store locations, the wrong store types. They had lower sales density than any competitors, and they didn’t really react.
GMB blames weak leadership for collapse of Wilko
Labour MP Liam Byrne, the chair of the Business and Trade committee, says the first panel will set the stage for the sessions on Wilko’s collapse (including with former chair Lisa Wilkinson) later this morning.
Q: Why did Wilko fail and who, if anyone, is responsible?
Nadine Houghton, the national officer of GMB, says her union doesn’t believe the collapes of Wilko was inevitable.
She tells the committee:
We think that actually, what brought about the collapse was weak leadership, and a failure of Wilko to adapt to a changing marketplace.
Houghton says the consistent face on the leadership team was Lisa Wilkinson, adding:
We do believe she bears a significant amount of responsibility.
Under Wilkinson, there was a high churn of executive directors, no CEO for at least eight years, while “a huge amount of dividends” were taken out of the company, Houghton says.
Instead, more money should have been invested to improve Wilko’s online offering, make it competitive on price, and make its stores “fit for purpose”, Houghton adds.
Q: So, a failure of strategic leadership, operational leadership, some financial issues, and a failure of leadership at the business?
A failure of leadership and a lack of accountability, Houghton adds.
Parliamentary session on Wilko’s collapse begins
Parliament’s Business and Trade commmittee are about to begin their hearing into the collapse of Wilko this year, with the loss of 12,000 jobs.
First up, they will hear from:
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Nadine Houghton, National Officer, GMB
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Patrick O’Brien, Global Retail Research Director, GlobalData
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Professor Atul Shah, Professor of Accounting and Finance, City University
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David Steinberg, Partner, Stevens & Bolton
UBS chair blames Credit Suisse’s investment bankers for its collapse
Kalyeena Makortoff
UBS’ chairman Colm Kelleher has blamed Credit Suisse’s investment bankers for leading to the lender’s eventual demise, and admitted one of his biggest concerns in taking over the rival lender was “cultural contamination” from those “bad actors”.
Speaking at the FT Banking Summit, Kelleher said:
“I was concerned (that) my single biggest risk when we acquired Credit Suisse was whether we would have cultural contamination there. That hasn’t worked out the case, mainly because most of the bad actors left anyway.”
Those “bad actors”, he explained, were “a lot of the investment bankers at Credit Suisse.”
“Credit Suisse would not have been in the position it was, if the investment bank had been allowed to be run properly. And I’m sure there were very many good investment bankers at Credit Suisse, that’s not a general rule, but it’s a clear point of what went on.”
While many Credit Suisse bankers left voluntarily as a result of the merger, UBS has also embarked on brutal job cuts, designed to cut costs and to avoid duplicating roles across the new group.
UBS confirmed earlier this month that they had slashed more than 4,000 jobs between July and September, bringing total job losses to 13,000 so far this year.