UK taxpayers handed bill for £50m as Comet closes for last time
A GOVERNMENT inquiry will be launched into the collapse of Comet at a cost of £50 million to the UK taxpayer.
The electrical retailer’s last remaining stores closed their doors for the last time yesterday as it emerged events surrounding the chain’s demise are to be examined.
The fact-finding exercise by the company investigations branch of the Insolvency Service will cover the run-up to administration and Comet’s takeover by a private equity-backed investment vehicle in February.
Deloitte, which was appointed to run the electricals retailer in November, closed the final 49 stores yesterday having failed to find a buyer for any of the 235-strong estate.
The collapse will cost a total of 6,895 jobs.
Comet, which was founded in Hull in 1933, is one of the biggest high-street failures since the demise of Woolworths in 2008.
With insufficient funds raised from the winding down of the chain, it has now emerged that the UK government will have to pick up the tab for £23.2m of outstanding redundancy pay, accrued holiday pay and pay in lieu of notice.
And a further £26.2m will be lost in unpaid tax to HM Revenue & Customs, which is an unsecured creditor.
The creditors’ report from Deloitte showed the investment vehicle put together by American Henry Jackson of OpCapita, which raised funding from unnamed investors for Comet’s takeover from French retail group Kesa Electricals, is expected to recoup just under £50m as a secured creditor, although the exact financial impact of the administration is not clear.
It received a £50m dowry from Kesa as part of the acquisition and continues to own Comet’s warranties business, which is not in administration. The vehicle was also repaid a £9.5m loan prior to the collapse.
The report states the chain racked up losses of £95m in the year to April, having seen revenues slump by £200m a year earlier.
This was followed by a further £31m loss in the subsequent five months as credit insurers lost confidence and withdrew support for the business.
Comet was hit by weak high street trading conditions, competition from online rivals and being unable to secure the trade credit insurance needed to safeguard suppliers.
In particular, it was knocked by the lack of first-time home buyers who were key customers for Comet.
A spokeswoman for the Department of Business, Innovation and Skills said: “We can confirm that the Insolvency Service has launched a fact-finding inquiry under section 447 of the Companies Act into Comet Group.
“The purpose of the inquiry is to investigate the circumstances surrounding its insolvency and to establish whether further action is required.
“We are not in a position to comment further at this stage. To do so could prejudice the outcome of the investigation and any future action. The Department for Business is already reviewing the overall insolvency regulatory framework, to see whether it remains fit for purpose in today’s environment.”
Comet’s demise is the latest in a string of failures on Britain’s high streets recently.
This year, a number of companies have run into trouble, including fashion retailer Peacocks, which was forced into administration, a form of bankruptcy. Eventually it was taken over in a deal that saved 6,000 jobs but cost 3,100. And Sports Direct stepped in to rescue 100 of the 180 stores of JJB Sports in October, a deal which saved 1,000 jobs but sacrificed 3,000.
US company American Greetings also picked up about 400 stores from Clintons Cards in June, a little more than half the estate, cutting employment from 7,500 to 4,500.
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