The former chair of collapsed retail chain Wilko has told MPs that the retailer “ran out of cash” before its turnaround efforts were able to take effect.
The business and trade committee heard Lisa Wilkinson explain a host of challenges, not least from high rents and other costs.
She said a crucial loan fell through amid the fallout from the notorious Truss government mini-budget of September 2022.
“We were about to enter into secured lending arrangements with Macquarie when the 2022 mini-budget happened”, she explained.
“Literally we were in the midst of that, and at that point the interest terms on that loan were hiked massively and that became infeasible. So, that was a contributor.”
Ms Wilkinson spoke of her regrets about letting staff and customers down.
“I am devastated,” she said, before being pressed if she wanted to say sorry, which she did, after being told how taxpayers alone had been left to foot a bill worth £40m towards redundancy costs.
She also admitted she has no financial qualifications.
Under questioning Mark Jackson, who was chief executive from Christmas 2022, said Wilko could not secure the funding it needed but conceded its problems were largely of its own making.
He said its biggest mistake was not furloughing staff and cutting rents during the COVID pandemic.
The budget homewares retailer collapsed into administration in August, eventually leading to the closure of 400 stores and loss of more than 12,000 jobs after the failure of rescue talks.
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Poundland takes over 71 Wilko stores
Only a handful of roles were saved through the sale of dozens of sites to the owner of Poundland and B&M while The Range, another value retailer, bought Wilko’s brand and online assets.
But there was union fury over the build up to Wilko’s failure.
The GMB accused the owners of bleeding Wilko dry through dividend payments.
Union national officer Nadine Houghton told the committee the company struggled from a lack of investment and leadership over many years, culminating in a weak response to challenges posed by higher than average rents and tough competition from discounters.
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What happened to Wilko?
She said £77m was paid out in dividends over the past decade.
A document by administrators PwC, that was seen by Sky News, showed the Wilkinson family received £9m in dividends between January 2019 and February 2022.
The most recent shareholder payout, amounting to £750,000, was made in February last year.
The GMB has previously called on the family to repay the money.
The PwC estimate showed that unsecured creditors, who include suppliers, employees and the pension fund, were due to receive as little as 4% of what they are owed by Wilko Ltd.
The defined benefit pension scheme has a deficit of more than £50m.
Another witness at the committee hearing said it was clear that auditors – an industry lambasted over previous failures such as at Carillion and BHS – had failed in their duty.
Atul Shah, professor of accounting and finance at City University, said annual audit reports by PwC and, from 2019, EY consistently showed the company had both “passed and failed” the key test, with the directors’ cash flow predictions likely to have eased worries about whether Wilko remained a going concern.
He believed the sale of Wilko’s distribution centre in Worksop was used to combat auditor concerns in 2021/22 – a report that was delayed by six months.
Victoria Venning, partner at EY, said it would have broken its obligations to have offered any advice on that matter.
She defended its finding of a “material uncertainty” surrounding Wilko’s ability to continue as a going concern.
She also insisted the assumptions on cash flows were sufficiently challenged by auditors.