This is why Yorkshire experts weren't surprised at collapse of Debenhams and Arcadia

The collapse of high street giants Debenhams and Arcadia which has left the fate of 25,000 workers hanging in the balance has been described by Yorkshire's only metro mayor as a "deeply worrying sign of the crisis in our high streets".

Some 13,000 staff at Sir Philip Green's Arcadia Group face an anxious wait following the business collapsing into administration. And Debenhams, which is already in administration, said it would start a liquidation process after JD Sports confirmed it had pulled out of a possible rescue.

The department store, which has branches in Leeds, Wakefield, Sheffield, Doncaster, York, Harrogate and Bradford, among others, has around 12,000 staff.

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Arcadia's brands, which includes Topshop, Dorothy Perkins and Burton, has hired Deloitte to handle the next steps after the pandemic "severely impacted" upon sales across its brands.

Many of Arcadia's staff worked at its brands' concessions in Debenhams, which had hoped for a rescue. Exclusive talks with JD Sports have now ended after the sports chain retailer walked away. A winding down process has begun.

Chancellor Rishi Sunak said the Government "stands ready" to help workers affected by job losses at Arcadia and Debenhams.

Speaking in the Commons, Richmond MP Mr Sunak said: "The news about Arcadia, and indeed Debenhams, is deeply worrying for employees and their families and the Government stands ready to support them.

Pedestrians walk past a Debenhams department store in London on December 1, 2020, as non-essential retail prepares to re-open its doors to the public on December 2 following a second national lockdown to help stem the spread of the novel coronavirus. Photo by JUSTIN TALLIS/AFP via Getty Images)

"With regard to various things that are ongoing, there are negotiations between various parties and the companies at the moment - particularly with regard to pensions - and it wouldn't be right for me to comment specifically on those."

Dan Jarvis, the metro mayor of the Sheffield City Region, said: "The closure of Debenhams and Topshop is a deeply worrying sign of the crisis in our high streets, and my thoughts are with all their workers in South Yorkshire. It only reinforces the need for bold action to help the economy weather the effects of COVID."

Sources close to JD Sports said the retailer saw a potential deal for Debenhams as "50-50" last week after entering exclusive talks with the high street stalwart.

However, it is understood that concerns over JD's lack of experience in running department stores and a shareholder backlash, which saw shares tumble after talks were first confirmed, contributed to the group backing out of a potential deal.

Debenhams has already axed 6,500 jobs across its operation due to heavy cost-cutting after it entered administration for the second time in 12 months.

Olga Munroe, Head of the Retail Institute at Leeds Beckett University, said the fate of Debenhams and Arcadia was "not really surprising in terms of what's been happening to that particular business for a period of time".

She said: "This particular group and retailers under the group have been struggling for quite a number of years and due to various reasons, not really up to date offer, a business model perhaps not completely adapted to the modern world, Debenhams particularly was quite confused as to who the customers really are at the moment.

"This really has been and is the last straw to a lot of retailers on a high street who haven't managed to maybe develop multi channel operations in an efficient way and update their offer.

"It's not, I would say the first one that we're going to see either, because I would imagine that the high streets will change dramatically after COVID, which again was a change that was coming for some time now."

Martin Payne, investment manager at wealth manager Brewin Dolphin (Leeds), said: “It is well documented that high street retail has been under threat long before the start of Covid-19 and many would argue that the rise of e-commerce and global online retail giants, such as Amazon and Alibaba, has been the real catalyst for Arcadia’s demise.

"However, a number of listed businesses in high street fashion retail have bucked the trend over recent years, increasing revenue and staving off the threat of disruption by these online giants.

"Next, for example, has invested aggressively in its online offerings in recent years, expanding from selling its own brand clothing to the inclusion of third party brands via its online platform. The business has been able to compete for customers online whilst maintaining a smaller high street presence, and has posted rising revenues through 2017 to the end of 2019.

“It is likely that the failure of Arcadia has been due to more than one factor, culminating over a period far longer than the Covid-19 pandemic alone. However, Arcadia’s collapse does not necessarily point to the total demise of the high street, as many businesses have already proven their staying power against the online competition. High streets will undoubtedly be around in 10 years’ time, however it is likely that the businesses operating on them will look very different to today.”