This is a useful documentary on the role of billionaire Philip Green in the collapse of British Home Stores, which demonstrates the relevance of some key concepts within Marxism.
British Home Stores was one of the best known high street retail stores in Britain for many decades, employing thousands of people, but in 2016 it went bankrupt, with a massive £550 million deficit in its pensions fund, and it seems Philip Green has a lot to do with this.
Philip Green bought British Home Stores in the year 2000, for £2 million. At the time, the store was failing, mainly due to its inability to keep up with the retail competition. Philip Green (in fairness to him) did turn the store around from being a failing company to a profitable enterprise in the early years of his ownership, but then he went to extract more money out the company than it was actually making, causing its ultimate collapse a decade later.
In total, over the next 15 years, Philip Green and his family extracted almost £600 million from the store in dividends, rental payments and interests on loans, £100 million of which went to fund their new super yacht named ‘Lion Heart’.
Green was very clever about the way he extracted money – it was technically his wife’s companies which owned most of BHS, and so it was his wife who received the millions of pounds in dividends payments , and because his wife was based in Monaco, a tax haven, she (and thus he) effectively paid no tax on those dividends. Between 2002 and 2004, shareholders extracted just over £422m in dividends, most of which went to Green’s wife.
Another strategy Green used was to sell off all the freeholds on which the BHS stores stood – to another of his wife’s companies, which were based in Jersey, another tax haven. This company then charged BHS rent for being on the land that BHS had previously owned. This amounted to several millions of pounds over the years, and again, all of this was tax free because Jersey was another tax haven. In total, the Green family collected £151.4m in rent using this strategy.
Things started to go pear shaped after the financial crash of 2008,, following which the pension fund had a £140 million deficit, which had grown to £225 million by 2015.
It was at this point that Green sold British Home Stores to a little known investment company for £1 – he agreed to pay in £40 million to the pension fund and gave then tens of millions in other sweeteners, knowing that he was effectively saving himself at least £150 million by passing on the pension-debt to this new company.
Retail Acquisitions failed to keep the company afloat, resulting in the eventual bankruptcy of the company, the closure of every single BHS store in the UK, thousands of job losses and, after a further year of no-profit, a massive £551 million deficit in the pension fund, which 20 000 people are members of.
Meanwhile, Philippe Green continues to enjoy the benefits of the nearly £600 million he extracted from the company during his time in charge, and it’s estimated that his wife’s property company is still currently earning about £20 million a year in rentals from the old BHS freeholds.