Should Woolworths have been saved?
It’s a sad day indeed when a towering high street brand such as Woolworths goes into administration.
The problem was not a declining business model as much as the inability of the company to service its debts.
When the government has done everything it can to infuse a huge amount of money into UK banks, it remains surprising that more help is not being provided for companies outside of the banking sector.
This is especially when you look at the risks to UK employment figures, which are already going down the tubes due to mass lay-offs.
Woolworths closing will see another 20,000 people directly out of work - and as the government has already stated each unemployed person costs around £8,000 p.a., a simple back-of-the-envelope calculations suggests that the immediate loss of Woollies closing is £160 million.
And that’s before we factor in other direct losses, such as loss of tax revenues from income tax and National Insurance contributions, which would probably double the figure.
And we haven’t even gone into losses relating to suppliers.
When you look at Woolworth’s key problem of refinancing it’s £395 million in debt, then the cost of not saving Woolworths could end up higher than letting it go down the tubes.
With MFI also in administration, and JJB Sports also in danger, the government needs to ask how much of Britain’s High Street retail sector it is going to allow to die before it realises the real economic cost of doing so.
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