BHS and Sports Direct are Part of a Bigger Problem in Society

The past few weeks have not been the best for the retail sector. The simultaneous inquires into BHS and Sports Direct have shown avarice, selfishness and egotism to pervasively run to the very core of the industry. More troublingly though, it has proved some of the fundamental theories behind Britain’s economic policy to be fatally flawed, punishing the very workers it ostensibly claims to aid.

Just last week, Dominic Chappell, the man who owned BHS when it entered administration in April, had to deny claims made by the retailer’s boss Darren Topp that Chappell threatened to kill him when questioning the nature of a £1.5 million bank transfer from BHS to its Swedish branch. This was just one of a number of dubious payments made during the former racing driver’s reign in charge of the beleaguered store which also included a series of outgoings amounting to £2.6 million which ended in the serial bankrupt’s pocket. Added to this are claims that Chappell’s company Retail Acquisition’s siphoned off profit made when BHS sold its Marylebone headquarters for £32 million in an attempt to alleviate some of its troubles.

This in truth though, has been the story of BHS for many years now. The store was already in massive turmoil when Sir Phillip Green acquired it at the start of the millennium, adding it to his portfolio of Arcadia outlets. At first glance this would have looked promising for BHS’s future considering the huge success of Topshop and Green’s other stores. But in hindsight it seems as though the billionaire, like Chappell, didn’t have any intensions other than to use the retailer as a cash cow. Indeed, he and other investors made around £580 million in dividends, rent and other payments during his 15 years in charge, all the while not reinvesting that capital back into the business.

Green sold the company for £1 to Chappell in 2015, a decision that has been called into question by MP’s inquiring into the collapse of BHS and has ignited a corporate soap opera between the store’s former hierarchy. But while this plays out in the media, it is yet again the workers who are paying most for the demise of the store. 11,000 people are now effectively unemployed and despite the amount accumulated by Green during his ownership, there is a £600 million hole in the pension scheme. Fortunately, the businessman has now agreed to cover this but only after public and political pressure deemed it almost impossible for him not to.

Ironically, it was Mike Ashley, another under-fire retail mogul, who offered to save BHS in its final days, a move allegedly blocked by Green. Ashley is one of the most controversial faces in British business. His Sports Direct stores are infamous for their mistreatment of employees; using full-body searches to deter theft and zero-hours contracts to minimise running costs. Just last week he admitted that workers were paid below minimum wage, a criminal offence for which he is likely to go unpunished.

All this considered, it is no coincidence that a Citizens Advice survey this week revealed that 4.5 million people (14% of the labour force) are in unsecure work. Of these, 2.3 million are working variable shift patterns, 1.1 million are on temporary contracts and 800,000 on zero-hour contracts.

There can be no doubt that this is fundamentally a consequence  of the economic policy of liberalisation and deregulation that governments have employed since the Thatcher years. Reduced top-end tax rates were supposed to encourage individuals to invest in the country, while relaxed labour laws intended to make investors more comfortable with hiring workers. The whole policy was supposed to create more jobs as a component part of the so-called ‘trickle-down economy’, but this simply has not happened. Inequality is larger than ever, growth is stagnating and unemployment remains a troubling issue.

The theory of neoliberalism may in theory have been conducive to a healthy economy when it was first fundamentally theorised by Adam Smith in 1776, but in the 21st century with its incomprehensible complexity, leaving business unregulated is not constructive, at least not for the working classes. The idea that that individuals acting in their own self-interest is good for everyone is now becoming ever-more out-dated and the government has to start imposing regulations to stop the decisions of a greedy few having such a drastic effect on the majority. If it does not act soon, the gap will keep growing, unemployment will rise and state spending will have to increase as a result.

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