British billionaire Philip Green’s high-street retail empire Arcadia is preparing to enter administration
Just as the Bangladeshi garment manufacturers were grappling with the possible impact of a second wave of coronavirus in the US and the EU, their two main export destinations, on came another stroke of uneasy news: the impending insolvency filing by British Arcadia Group, their major buyer.
British billionaire Philip Green’s high-street retail empire Arcadia is preparing to enter administration, putting hundreds of shops and more than 13,000 jobs at risk in what would be the biggest retail collapse of the pandemic so far.
The group, whose brands include the highly popular Topshop, Burton and Wallis, said it was “working on a number of contingency options” after Covid-19 hit its struggling business hard.
“The forced closure of our stores for sustained periods as a result of the COVID-19 pandemic has had a material impact on trading across our businesses,” Arcadia said on Friday.
The group, which has been a signpost in the British high street, has not paid rent on many of its stores for months, according to real estate advisers, reports Financial Times.
While Arcadia said it is working on contingency options so that it could avert the collapse and secure the future of its brands and employment of its about 13,000 people, it is not of much solace for its Bangladeshi suppliers, who have not received payments, which are in tens of millions, for months.
It has yet to pay for its orders that were placed before coronavirus began tearing through the globe but whose scheduled delivery happened to be during the pandemic despite over eight months of public pressure, according to a study by London-based human rights charity Business & Human Rights Resource Centre, released on November 12.
The British buyer sought an extension of 90 days to make payments and retrospective discounts, found the study, which had surveyed 50 clothing brands in November.
According to a June estimation of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the sector’s apex trade body, six Arcadia brands -- including Burton, Dorothy Perkins, Topman, Topshop and Miss Selfridge -- cancelled or held work orders amounting to $26.4 million.
However, the figure is most definitely bigger as all the suppliers did not report to the BGMEA, when it sought information of order cancellations or deferred payment from factories to analyse the impact of the pandemic.
“This is from our initial estimation based on the response from the suppliers. The real figure is higher,” said NafisUd Doula, chairman of RMG Sustainability Council (RSC), who was assigned to assess the impact of work order cancellations.
Global apparel buyers cancelled or held work orders of about $3.2 billion when coronavirus arrived.
Dhaka Tribune traced the Bangladeshi suppliers of Arcadia and the majority declined to go on record for the report for fear of reprisal from the buyers.
“Arcadia did not pay its suppliers fully -- a significant portion of the payment is pending,” said a member of the BGMEA who is still waiting on his payment from the British group on the condition of anonymity.
However, some of the manufacturers who received orders via third parties like buying houses did receive payment.
“Arcadia restored the work orders and took the products it had cancelled when the pandemic began. But it is making an unusual delay in clearing the payment,” said a supplier seeking anonymity to not upset the British fashion giant.
But for orders that were put on a delayed shipment or are on hold, the exporters are in a puddle of uncertainty.
“Now we are in grave concern as the company is on the verge of collapse and it is not known to me how we would be paid or what would be the method after the appointment of an administrator,” said another supplier.
The other big concern is the discount a beleaguered Arcadia would demand to take the finished goods.
“I came to know that Arcadia demanded a 20 to 30 per cent discount, which means about 20 per cent losses. It is a big concern for the manufacturers,” Doula said.
Regardless of Arcadia’s fate, its Bangladeshi suppliers though would have their investment stuck for the foreseeable future.
“Since we have no protection against buyers’ bankruptcy, we will be faced with non-repatriation of fund risks, which will ultimately impact our single borrower exposure limit,” BGMEA president Rubana Huq told Dhaka Tribune.
Subsequently, the BGMEA has requested the central bank to create a block account for outstanding liabilities that result from brand insolvencies so that its members can continue with their business, she added.
Earlier in April, another British high street titan Debenhams had filed for administration, leaving its Bangladeshi suppliers waiting for payment upwards of $66 million.
In the same month, American retail treasure JC Penney also filed for bankruptcy, leaving its Bangladeshi vendors in the same wobbly boat.