• Maria Polycarpou

The UK High Street House of Cards: The Collapse of Arcadia Group

As we have previously covered, the UK high street has been hit with a devastating blow after this year’s unprecedented events, prompted by the forced closure of stores for a prolonged period. Arcadia Group is the latest nail on the coffin for the UK high street; its entry into administration being called the biggest British corporate failure of the pandemic. Deloitte (Arcadia's administrator) is starting to receive bids for Arcadia’s jewel portfolio company Topshop, whose acquisition is likely to change the face of the UK high street irreversibly. This article will examine the reasons behind this administration decision, its impact on workers, consumers and competitors in the backdrop of UK insolvency law.

Arcadia Group

Arcadia Group, owned by Sir Philip Green, has about 444 directly leased stores in the UK and 22 overseas, as well as dozens more concessions in department stores and other outlets including Tesco. 9,294 employees of Arcadia Group were on furlough while its administration has led to 13,000 jobs being put at risk.

For those who have followed Arcadia Group’s descent in the past 5 years, this administration decision will come as no surprise. Arcadia had been in a difficult financial condition prior to the pandemic, having lost market share to rivals such as Primark, Next and H&M, and has been too slow to invest in e-commerce. The beginning of the end was in 2015, where Arcadia Group’s operating profit decreased by $115 million, and total sales dropped by 5.6%. At the time the company blamed those falling figures on its “increasing switch from in-store to online shopping”, as well as aggressive discounting by competitors, rising business rates, and the new living wage. It seemed Arcadia group could not overcome these issues in the years to come. Last year, Arcadia entered into a company voluntary arrangement, a type of agreement insolvent companies can come to with creditors to keep operating. It closed more than 80 stores and renegotiated rents of others. It also filed for bankruptcy in the United States and closed all of its stores there.

The global pandemic sealed Arcadia Group’s fate. According to the Office of National Statistics (ONS), foot traffic on British commercial areas was down 60% compared with last year. Since February, online retail sales have grown 45% in Britain while clothing sales – online and in-person – have declined by 14%. Despite the opening of stores in July and December respectively after both national lockdowns had ended, and the massive queues of people trying to get inside, this could not amount to a saving grace for Arcadia and many other retailers. The ban on opening physical stores was not the only hurdle for retailers; the impact on the overall economy further pushed Arcadia Group into decline. Consumers have less disposable income (due to furloughed jobs or mounting unemployment) and have more fear of crowded places; this paired with the increasing costs of adapting stores according to health standards means that retailers continue to suffer.


Law firm Freshfields Bruckhaus Deringer and Big Four professional services firm Deloitte have taken key roles for struggling fashion empire Arcadia. Deloitte, the professional services firm, will be put in charge of a “trading administration” that leaves the existing management team in charge of day-to-day operations. Stores will remain open and no immediate redundancies will be made.

Administration is an insolvency process under the Insolvency Act 1986, by which a company is placed under the control of an insolvency practitioner (Deloitte in this case). The objective of the administrator is, where appropriate, to restore profitability by reorganising the company’s business in whole or in part. This may involve making proposals to realise the company’s assets to obtain a better result for creditors than could be obtained on an immediate winding up. During administration proceedings, there is an automatic moratorium, which means a creditor can't bring or pursue legal proceedings against the company or its assets. This will give Arcadia breathing space from creditors, such as landlords for its shops or clothing suppliers, while a buyer is sought for all or parts of the company. Arcadia executives will still hold day-to-day control over the business. Matt Smith, joint administrator at Deloitte, said that it will be working with Arcadia management to assess all of the options available to the group's brands, which also include Evans and Outfit.

The Bigger Picture

The administration of Arcadia Group has impacted Debenhams, another UK high street retailer facing financial struggles. A high percentage of Arcadia Group’s brands are sold at Debenhams, who one day after Arcadia group announced administration proceedings announced its liquidation. This means that Arcadia Group’s collapse will likely create a domino effect for a long line of struggling retailers. The effects of a series of closures may lead to massive scale unemployment as the retail industry employs 3 million workers across the UK. The ‘woes of the UK high street’ are a large contributing factor to Britain’s economy being expected to decline by more than 11 percent this year, worse than almost every other advanced economy. In contrast, it has spent more than most others on its fiscal response.

The Future of Arcadia Group

Fast Fashion retailer Boohoo is seen as a potential buyer, among others such as US Authentic Brands (who is also looking to acquire Debenhams), for some of Arcadia Group's big-name brands, such as Topshop. In the past, it has bought struggling brands Oasis, Warehouse, Karen Millen and Coast, revamping the brands' image to appeal to a younger customer base. Boohoo’s competitive advantage comes from its lack of physical presence in the UK high street, which means lower costs from lack of business property taxes and rents, as it operates from a warehouse. A possible acquisition of Arcadia brands by Boohoo would raise the prospect of massive store closures given that Boohoo has always been very clear that it doesn't want to operate physical shops. It has always closed the store estates of any of the brands that it has acquired. Could this mass switch to e-commerce lead to the death of the UK High street? This remains to be seen.