Lisa Wilkinson was “devastated” and “sorry” for Wilko’s collapse in August and, unlike some former bosses of bust companies who have appeared before business select committees, tried to answer the MPs’ questions. What the former long-serving chair of the company did not do, however, was volunteer to return a penny of dividends paid to the Wilkinson family in recent years. When the shortfall in the pension fund is a reported £50m, that was a mistake.
Let’s be clear, there is no suggestion of wrongdoing by Wilkinson or any directors of Wilko. Kevin Hollinrake, minister in the business department, appearing afterwards, was clear that the Insolvency Service and the Pensions Regulator have found no evidence of director misconduct. That is not surprising because the three-hour committee session really revealed old-fashioned boardroom incompetence, which is a very different thing.
Mark Jackson, the chief executive who arrived last Christmas, which turned out to be too late, pointed to three specific errors. Wilko lost £40m in 2018-19 on foreign exchange derivatives related to supply deals in the far east. It botched a £60m upgrade of warehouse systems. And it decided to keep its stores open during Covid when it could have saved money by furloughing staff. The last two help to explain how a business with £100m of cash in January 2021 could run out of money in August 2023.
To the catalogue of errors, one can add long leases at 40% above market rates. In essence, Wilko allowed itself to get into an uncompetitive position versus sharper rivals such as B&M and Home Bargains. But it all falls under the general heading of “weak leadership”, as the GMB’s national officer put it.
Nor can one say the pension fund was recklessly underfunded on the information available at the time. On the numbers presented by Wilkinson, the deficit was not vast for a company of its size. It was £12.2m in the 2022 accounts and had narrowed to £7.4m in 2023’s. Wilko was making regular annual contributions so, if the business had stayed alive, it was reasonable to assume that the gap could be closed. The higher £50m deficit arises because, at the moment of collapse, you have to take a more conservative “buyout” view of the deficit – one that reflects the cost of transferring assets and liabilities to a third-party insurer.
The point, though – the one that Wilkinson failed to address directly – is that, once collapse has happened and a buyout basis becomes appropriate, recent dividends are also relevant.
There’s not much point looking at payments related to the 2014 transaction via which one part of the Wilkinson family bought out another. That is ancient history. Rather, we’re talking about subsequent dividends paid to the Wilkinson family office under post-2014 ownership arrangements. They add up to £15m, including £2.25m as late as 2022, said Wilkinson, before revealing the intriguing intelligence that £16m of assets are still sitting in Amalgamated Holdings Wilkinson Limited (AHWL), the family office that was the 99.7% owner of Wilko.
A sum of £16m may indeed have been too small to rescue Wilko at the crunch moment, as Wilkinson argued. But why should a holding company be able to insulate itself when employees are being hit in their pensions by the collapse of the main operating subsidiary? Pleading duties to shareholders to AHWL was unconvincing. Legally, there may be nothing that can be done. Morally, the Wilkinson family – or the relevant members of it – should be looking at themselves in the mirror.
