Poundland Founder Predicts High Street Retail Collapse If Chain Fails

Steve Smith, the founder of Poundland, issued a warning on Sunday that the discount retailer's failure could trigger a chain reaction causing other high street shops to go out of business.

Smith, who started the company in 1990, stated that if Poundland enters administration, the resulting economic impact will create a multi-billion-pound problem for the government.

The retailer faces imminent collapse after its American owners, Gordon Brothers, rejected a takeover offer and filed a notice with the High Court to appoint administrators earlier this week.

The current uncertainty places the jobs of more than 12,000 employees at risk across 600 stores in the United Kingdom and Ireland.

Smith, who sold the company for £250 million in 2006, believes the collapse could lead to wider job losses of 30,000 across the retail sector. He noted that Poundland supplies two to three thousand vendors, many of which rely solely on the chain for income.

Smith told Metro that the store's disappearance from shopping centers would reduce foot traffic for neighboring businesses. He predicted that other retailers would suffer from the lack of customers and that more would fail as a result.

Gordon Brothers acquired Poundland from the Polish retail group Pepco last year for one pound. A note sent to suppliers showed that store sales increased by 8.4 percent in the three weeks leading up to October 18. Despite this growth, the owners decided to reject a rescue bid from the Londonderry-based Martin Property Group.

Smith described the move to administration as a crying shame, noting that the management team had performed well and that the business was continuing to improve. He argued that Poundland could have operated for another 30 years. Smith is currently waiting to hear from Prime Minister Andy Burnham, who said the government was ready to support the staff during this difficult time. Smith estimated that the cost of supporting 12,000 workers in wages alone would be half a billion pounds per year, with the total taxpayer burden potentially reaching billions.

Gordon Brothers has indicated it wants to break up the company, with rivals such as Poundstretcher, B&M, and Lidl showing interest in purchasing its stores. Smith claimed he had tried to buy the company back for months but said Gordon Brothers would not speak to him. He now supports the Martin Property Group bid. A source familiar with the process said Gordon Brothers had not heard from Smith and that their plan to sell stores to established operators was the best option to preserve jobs and provide creditors with returns.