The Collapse of Wilko

Wilko, the chain of hardware and household stores which was founded in 1930, now stands on the brink of collapse having entered administration on 10th August 2023 and failing to find a buyer in the two weeks since. The chain owns 400 stores and employs 12,500 workers across the country, most of whom look likely to be made redundant over the next few weeks. In addition to this, Wilko’s defined benefit pension scheme, which was closed to new entrants in 2013, is carrying a £50m deficit and is being currently assessed by the Government’s Pension Protection Fund. For everyone currently in the employ of Wilko’s, this is a very worrying time.

Like many high street names, Wilko has been struggling for some time. Woolworths, which went bust fourteen years ago, left a huge gap in the high street, which Wilko filled. They sold the kinds of products that Woolworths used to sell and they had a high street presence which, while not as prominent as Woolworths, was sizeable enough for the chain to mop up their former custom. However, in the years since Woolworths went bankrupt, Wilko has suffered as high streets and town centres across the country have suffered an inexorable decline and they were disproportionately affected by Government-imposed restrictions in response to Covid-19.

Wilko’s custom was mainly through footfall and, with shops closed and travel restricted during lockdowns, they were hit hard and, just last year, closed fifteen of their stores and made 1,600 staff redundant. Throughout Covid, they were essentially propped up by Government schemes introduced to support businesses and, when those schemes were wound down, Wilko became exposed. Wilko is also a chain whose stores are mainly in high street locations, which are expensive to run, both in terms of rent and rates. As a result, they make less money per square foot of floorspace than stores based in out-of-town retail parks. For instance, Marks & Spencer have spent the last three years closing down its high street locations and either opening new, larger out-of-town stores or converting their food and clothes stores to food halls.

Two of Wilko’s main rivals, B&M and Home Bargains, were quick to seize upon the opportunities offered by the continuing development of vast out of town retail parks and made sure that they had stores on them. Wilko failed to react to the changing high street landscape, failed to move to out of town centres and so suffered as result. As well as this, they have suffered from the same credit issues as beset Woolworths in their last few months before liquidation – Wilko’s loss of credit insurance meant that they either would have to pay cash for new stock or leave their shelves empty.

Wilko haven’t been helped by their owners, either. The Wilkinson family, who founded and still control the business, have taken dividends totalling £3m in the last year, despite the company struggling and falling almost £40m into the red. In the last ten years, Wilko had paid out £77m in dividends to its owners and other shareholders. They have also presided over a period of instability in the boardroom, losing their managing director, Chief Financial Officer and Chief Executive within the space of five years and abandoned its former business model of ‘pile high, sell cheap’.

The collapse of Wilko is yet another body blow to high streets and town centres across the nation which have already been in deep decline for years. Since Woolworths collapsed in 2009, they have been joined by major retailers like BHS, Debenhams, House of Fraser, Maplin, Dorothy Perkins and M & Co and in their place they have left huge, empty premises with no major retailers left to fill them.

Capitalism has no answers to this problem. The quest for profit has pushed the production of goods to far-flung nations, while the stores that these goods are sold in have abandoned town centres and high streets for out-of-town locations and the internet. With town centres becoming increasingly desolate, local authorities have no ability to prevent the hollowing out of former shopping areas and have limited powers to re-purpose of these premises, for example into housing.

For the workers at Wilko, things are arguably even more dire. Those with long service will be concerned that their pension fund is carrying a £50m deficit and they will receive meagre redundancy payments when the inevitable collapse of the chain is confirmed. As always with capitalism, it is those who create the wealth that are too often hapless victims when businesses fail, while the private owners of the means of production ride off into the sunset with their pockets bulging and their fortunes intact.