Poundland founder warns chain's end could cost government billions in benefits

Steve Smith, the man who built Poundland from the ground up in 1990, issued a stark warning on Saturday that the discount retailer's failure could trigger a chain reaction of insolvencies across the UK high street. Smith, who sold the company for £250 million in 2006, stated that the collapse would not just be a retail issue but a "multi-billion-pound problem for the government" due to the resulting unemployment and benefit claims.

The warning comes as Poundland faces its most severe crisis since its founding. The company is currently on the brink of administration after its US-based owners, Gordon Brothers, rejected a rescue bid and filed a notice of intention to appoint administrators earlier this week. This move puts the jobs of more than 12,000 staff members across 600 stores in the UK and Ireland at immediate risk.

Smith argues that the impact will extend far beyond the shop floor. He noted that Poundland supports two or three thousand suppliers, many of which rely exclusively on the chain for their business. "Those businesses are going to suffer," Smith told Metro. He pointed out that Poundland drives millions of weekly visitors to shopping centers and high streets. Without the store, he predicted, foot traffic would drop, causing other nearby retailers to fail.

The timeline of the crisis began last year when Gordon Brothers purchased the struggling chain from the Polish retail group Pepco for a nominal £1. Despite the low entry price, the new owners have struggled to stabilize the business. A note sent to suppliers and seen by The Sunday Times indicated that sales actually rose by 8.4 percent in the three weeks leading up to October 18, suggesting the brand still has commercial viability.

Gordon Brothers moved quickly to file for bankruptcy at the High Court, rejecting a takeover proposal from the Londonderry-based Martin Property Group (MPG). Smith criticized this decision, calling it "absolutely crazy" and a "crying shame." He emphasized that the management team had performed well and that the company was continuing to improve, stating, "It is not like Poundland is suffering.. Poundland could be here for another 30-odd years."

Smith claimed he had attempted to buy back the company for months but said Gordon Brothers would not engage with him. A source familiar with the process disputed this, stating that Gordon Brothers had not heard from Smith. The US owners believe their plan to break up the chain offers the best path forward. Rivals including Poundstretcher, B&M, and Lidl are reportedly interested in acquiring stores through this process.

Gordon Brothers maintains that their strategy is the "best option to preserve jobs and to make returns for creditors." They argue that established retail operators will absorb the stores, moving employees onto their existing pension schemes and benefit structures. "These recognisable brands then take these employers on," the source said, describing the process of integrating the workforce into larger corporate structures.

The current Prime Minister, Andy Burnham, has said the government is "ready to support" Poundland during what he called a "deeply worrying time." Smith is waiting for a call from Burnham to discuss the next steps. He estimates that the loss of 12,000 direct jobs alone represents half a billion pounds in annual wages. With his estimate of 30,000 total job losses, he warned that the cost to taxpayers in benefits would reach billions.

The situation remains fluid as the courts process the administrator appointment. While Gordon Brothers says they are thoroughly evaluating all active bids to minimize uncertainty for stakeholders, the rejection of the MPG bid has left a vacuum in the rescue process. Smith is currently supporting the MPG effort, though he says it is too late for him to assemble his own competing rescue package.

The potential breakup of Poundland represents a major shift in the UK discount market. With major competitors like Lidl and B&M circling, the outcome of the administration will determine whether the stores operate under familiar management or get absorbed into larger conglomerates. For now, the 12,000 employees await a decision that could reshape their careers and the retail streets where they work.