Why did Wilko fail?
The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
The former bosses of Wilko have appeared in front of MPs this morning to answer questions about the collapse of the discount chain.
Wilko fell into administration in August, resulting in the closure of 400 shops and the loss of 12,000 jobs.
Doug Putnam, the Canadian billionaire and owner of HMV, spoke ahead of the hearing today about his attempts to rescue as many as 300 of Wilko’s shops and why that deal failed. He told BBC Radio 4’s Today programme that a deal became “literally impossible” because companies were “super inflexible” about the payments they wanted to keep Wilko’s IT systems running. This included the rent that landlords were seeking on the buildings that housed Wilko’s servers. Putnam said:
"So I would say everyone just got a little bit greedy and unfortunately weren't thinking about the 10,000-plus jobs that would have been saved and were only thinking about their little piece of it."
Those who appeared in front of MPs this morning included Lisa Wilkinson, the former chairman of Wilko, and Mark Jackson, the former chief executive. MPs on the cross-party Business and Trade Committee are looking into the reasons that the company collapsed.
Wilkinson is the granddaughter of James Kemsey Wilkinson, who founded the business in 1930 in Leicester. She apologised to former staff during a tense exchange with Liam Byrne, the chairman of the committee. Wilkinson said:
"I am devastated that we have let each and every one of these people down with the insolvency that Wilko has done. I don't know how to put into words how sad I am that we have 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 then replied:
“Well ‘sorry’ was the one word I was looking for, and which I didn’t hear.”
Wilkinson responded:
“You can have the word ‘sorry’. Of course I'm sorry, if you wish me to say the word ‘sorry’. I thought devastated covered it. I apologise. I wasn't trying to be clever. I am sorry that we are not there supporting all those people anymore.”
Wilkinson also revealed that the market chaos following the mini-Budget last year had disrupted a deal for new funding…
Wilkinson said she wished that Wilko had moved faster to tackle its problems, such as bringing in Jackson as chief executive earlier than December 2022 and taking advice from PWC, the accounting firm. When asked by Byrne about whether the company had collapsed due to “greed” (millions were paid in dividends to the family), she replied: “I don’t believe so, no.”
You can watch the full hearing here. I also recommend checking-out our podcast episode on why Wilko and other retailers fail, in which we speak to retail expert Ian Shepherd. That episode is here
Podcast…
The latest episode of our Business Leader podcast has been released this morning. It looks at the story of how Metro became the most-read daily newspaper in the UK after launching in 1999. We speak to Deborah Arthurs, the editor-in-chief, and Richard Thomson, the managing director, about how Metro disrupted a highly competitive industry and how it has had to battle against a string of big challenges, some of which posed an existential threat to the business.
You can listen to the episode on Substack here, Spotify here and Apple here
Other stories that matter…
1. The UK is still the leading destination in Europe for investment in technology companies, according to the latest edition of the closely-watched State of European Tech report by venture capital firm Atomico. However, venture capital investment in the UK is expected to fall by more than half in 2023 compared to last year to around £10 billion. You can read the full report here, see a presentation here and find a summary of the key findings here
2. A key reason why productivity in the UK is below other countries is a low capital stock per hour worked, according to a fascinating post on LinkedIn by Tera Allas, director of research and economics at McKinsey. This capital stock per hour is a measure of how annual investment in and out of the UK builds up over time. “For each hour worked, UK employees benefit from less than half the invested capital base compared to its most important peer countries: the US, Germany, France, the Netherlands, and another 4 (smaller) European countries,” she writes. “So this is not just an issue of lower investment flows; it is an issue of low net flows over a large number of years accumulating to a much lower asset base than that in other countries.” You can find the LinkedIn post and graph here
3. As covered in yesterday’s Off to Lunch, Rishi Sunak hosted an event for business leaders on Monday to try to attract more investment into the UK. Stephen Schwarzman, the boss of private equity firm Blackstone and one of the attendees, said that there needs to be more “consistency” in the government’s approach to business. “Something that people in the government may not be as sensitive to is that people like us need consistency,” he said. “We need to be able to trust what’s going to be happening.” You can read more in a story by The Times here. Ian Stuart, the UK chief executive for HSBC, expressed a similar view. “There’s still the overhang of an election next year, probably. People don’t like that uncertainty,” he said. That quote is from a Guardian summary of the event here
4. Sticking with investment, plans to invest £36 billion into improving transport infrastructure across the UK, especially in the north of England, are riddled with uncertainty and have not been properly costed, according to a story by the Financial Times. The government announced last month that it would make these investments instead of extending HS2 to Manchester. However, Sir John Armitt, chairman of the National Infrastructure Commission, is quoted in the piece as saying that some of the projects behind this investment have “not been designed in any sense of detail whatsoever”. Story here
5. Finally, I recommend reading The New Yorker’s excellent profile of Nvidia co-founder and chief executive Jensen Huang about how he built the chip-maker into one of the biggest companies in the world. Nvidia’s share price is up more than 200 per cent over the last year - valuing the company at $1.2 trillion (£950 billion) after it emerged that its chips are being used to develop and power AI technology. Here is an extract from the piece: “Huang has a practical mindset, dislikes speculation, and has never read a science-fiction novel. He reasons from first principles about what microchips can do today, then gambles with great conviction on what they will do tomorrow. ‘I do everything I can not to go out of business,’ he said at breakfast. ‘I do everything I can not to fail.’” You can read the piece in full here
Thanks for reading. If you enjoy Off to Lunch then please share it with others and spread the word. If this newsletter was shared with you then please sign-up below to get Off to Lunch sent directly to your inbox
Best
Graham