Debenhams set to close all stores

Last-ditch efforts to save Debenhams have failed.

The department store chain said on Tuesday that it was starting the liquidation process after the last remaining bidder, JD Sports, withdrew from talks.

The 242-year-old retailer had been in administration since April and had already cut about 6,500 jobs due to cost-cutting measures. It currently employs 12,000 people across 124 stores.

If the administrators are unable to reach a final deal for all or parts of the business over the coming months, all jobs at Debenhams will be lost.

Debenhams will continue to trade while the liquidation process is ongoing. Restructuring firm Hilco will start going into stores on Wednesday to begin clearing stock, BBC News reported.

Geoff Rowley of FRP Advisory, joint administrator to Debenhams, said the company was unable to reach a viable rescue deal due to the “extremely challenging” economic landscape, coupled with the uncertainty facing the UK retail industry.

The news came just hours after Arcadia Group, owner of Topshop, Dorothy Perkins and Burton, fell into administration, putting 13,000 jobs at risk.

Arcadia operates 444 stores in the UK and 22 overseas.

Uncertainty over furlough scheme ‘cost jobs’

Employers in Britain were preparing to make 51,000 redundancies in October, new figures reveal.

It came amid rapidly rising levels of Covid-19 infections and uncertainty over changes to job support schemes.

The UK Government’s furlough scheme, paying 80% of an employee’s wages, was due to end on 31 October. On the final day of the scheme it was extended for another month, and then on 5 November it was extended until the end of March.

Figures released to the BBC in response to a freedom of information request show that during October a total of 842 employers told the Government of plans to cut 20 or more jobs.

Under legislation that applies in England, Scotland and Wales, employers must notify the Insolvency Service if they plan to make 20 or more workers redundant in any single “establishment” using a form called HR1.

“These figures show us that many businesses were planning lots of job losses back in October because they were very worried and concerned about the evolving economic situation, and how that would unfold over the winter,” Rebecca McDonald, senior economist at the Joseph Rowntree Foundation, told BBC News.

McDonald added that Chancellor Rishi Sunak’s “messy and last-minute approach” to announcements about job support “contributed to the lack of certainty and unfortunately will have cost jobs”.

Although the October figures are almost two-and-a-half times the level seen in October last year, they are lower than those recorded in June, July and September.

Long-term impact of no-deal Brexit ‘worse than Covid-19’

Leaving the European Union without a trade deal would have a bigger impact on the UK economy in the long term than the damage caused by Covid-19, the Bank of England governor has warned.

Speaking to MPs on the Treasury Select Committee, Andrew Bailey said that a no-deal Brexit would cause disruption to cross-border trade and damage the goodwill needed to build a future economic partnership.

If the UK fails to agree to a deal before the Brexit transition period expires at the end of December it will revert to World Trade Organisation tariffs and trade barriers with its biggest trading bloc.

The central bank governor acknowledged that the fallout from the pandemic and the second national lockdown in England was having a greater short-term impact on the economy.

But he argued that in the longer term, the economic cost of leaving without a deal would be larger than the cost of Covid.

“It takes a much longer period of time for what I call the real side of the economy to adjust to the change in openness and adjust to the change in the profile of trade,” Bailey said.

In September, an analysis by the London School of Economics and UK in a Changing Europe concluded that the long-term economic impact of a no-deal Brexit could be two or three times as large as that of the pandemic.

How will home working affect the UK economy?

UK businesses could suffer from a lack of creativity due to colleagues not being able to interact in the workplace during the Covid-19 crisis, the Bank of England’s chief economist has warned.

Covid-19 has had a dramatic on the way we work, with many people forced to work from home for the first time. Shortly after the UK first went into lockdown, the Office for National Statistics (ONS) found that almost half (46.6%) of people in employment were doing some work at home, and of those 86.0% did so as a result of the coronavirus pandemic.

And while this brings potential benefits for employees (such as no commute) and employers (such as the opportunity to reduce overheads), there are downsides when people are no longer mixing together in the workplace, Andy Haldane said.

In a speech at the recent Engaging Business Summit, Haldane acknowledged that virtual meetings “can be an efficient way of getting things done, indeed often more effective than the physical” but he argued that informal chats at work are often more useful than formal meetings.

The chief economist added: “Whether it is creative sparks being dampened, existing social capital being depleted or new social capital being lost, these are real costs and costs which would be expected to grow, silently but steadily, over time. They weigh on the other side of the ledger when it comes to assessing the case for home-working. They cast doubt on whether it will lead to the promised land of improved productivity and greater happiness.”

Haldane concluded that businesses need to find the right balance between what distracts employees and what fires their imagination.

“For me, the 0-5 model of homeworking strikes this balance in the wrong place, as with hindsight did my pre-pandemic 5-0 model.”

Covid-19 ‘bounce back’ loans could cost UK taxpayers £26bn

Up to 60% of borrowers may default on business loans provided through the UK Government’s Bounce Back Loan Scheme, the National Audit Office (NAO) has warned.

A new report by the spending watchdog says that the scheme “succeeded in quickly supporting small businesses” but the Government faces a potential loss of £15bn to £26bn through businesses not being able to repay the loans and fraud.

The Bounce Back Loan Scheme was set up to support smaller businesses during the Covid-19 pandemic. Loans are delivered through commercial lenders and small and medium-sized firms can borrow between £2,000 and up to 25% of their turnover, with a maximum loan of £50,000 available.

Demand has been greater than anticipated, with the total value of loans provided through the scheme now predicted to be £38bn to £48bn, up from an initial estimate of £18bn to £26bn.

However, the Bounce Back Loan Scheme has less strict eligibility criteria than other Covid-19 related business loan schemes, relying on businesses self-certifying application details with limited verification and no credit checks performed by lenders for existing customers.

This lower level of checks presents credit risks as it increases the likelihood of loans being made to businesses that will not be able to repay them, the NAO said.

What’s more, the Government’s 100% guarantee against the loans reduces lenders’ incentives to recover money from borrowers.

An earlier third-party review commissioned by the British Business Bank found that, while some risks can be mitigated, there remains a “very high” level of fraud risk, caused by self-certification, multiple applications, lack of legitimate business, impersonation and organised crime.

The full extent of losses, both credit and fraud, will emerge when the loans are due to start being repaid from 4 May 2021.

The NAO called for the Government to implement a thorough debt-recovery process with lenders and consider how it might better prevent fraud in any similar schemes in the future.

HMRC estimates 1 in 10 furlough claims may have been fraudulent or paid in error

Businesses may have wrongly claimed up to £3.5bn in furlough payments, HM Revenue and Customs believes.

The UK Government has so far paid out £35.4bn through the Coronavirus Job Retention Scheme to help protect jobs and businesses during the Covid-19 pandemic. The scheme covered up to 80% of an employee’s salary while they were placed on leave due to the impact of coronavirus.

However, HMRC estimates that 5-10% of the total amount may have been claimed fraudulently or paid out in error. It intends to investigate fraudulent claims, HMRC chief executive Jim Harra said on Monday.

Speaking to MPs on the Public Accounts Committee, Harra said: “We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%.

“That will range from deliberate fraud through to error.”

Although employers will be expected to check their claims and repay any excess amount, HMRC will focus on tackling abuse and fraud.

It is currently reviewing 27,000 “high risk” cases where officials believe a serious error has been made in the amount an employer has claimed, according to BBC News.

Figures from mid-August show that 9.6 million people had been put on Government-supported furlough, with claims made by 1.2 million employers.