Any sale to EG will likely result in a short-term supply disruption to McColl’s stores
Convenience chain McColl’s has confirmed it has gone bust and will appoint administrators, putting 1,100 stores and 16,000 jobs at risk.
However, Morrisons and EG Group have both submitted definitive offers to seal a bailout agreement for the insolvent retailer.
First, Sky News reported on Thursday, May 5, that the company could bring in administrators as early as the next day.
McColl’s had been in talks with potential lenders to bolster the company, which has been struggling during the pandemic due to supply chain challenges, inflation and a heavy debt burden.
However, talks with the lenders collapsed on Friday (May 6) after creditors refused to extend a deadline for the company to find additional funds.
Here’s everything you need to know about it.
What is McColl’s?
McColl’s Retail Group is a British chain of retail and newsagents operating under the names Morrisons Daily and McColl’s (for its grocery stores), Martin’s (for its newsagents and pound stores) and RS McColl in Scotland.
The company operates over 1,100 convenience stores in England, Scotland and Wales.
It was founded in Glasgow in 1901 and, according to its website, serves around five million people a week.
Morrisons and McColl’s are key partners, with McColl’s operating hundreds of convenience stores under the Morrisons Daily brand.
The company employs 16,000 people, most of them part-time; it was hoped that an agreement with Morrisons would save those jobs.
Why is it fighting?
McColl’s has been “in a difficult place, particularly with Covid-19,” Teresa Wickham, a former director of Safeway, told the BBC’s Today programme.
She said the pandemic struck at a time when the company was moving from typical convenience stores to more fresh fruit through its alliance with supermarket Morrisons.
Wickham said stores that had done so had done well because shopping habits had shifted to buying more local produce during the coronavirus crisis, but the chain lacked investment and only a small percentage of its stores made the switch.
In 2021, McColl’s was also accused by the government of failing to pay some of its employees the UK minimum wage.
It claimed that the underpayments were due to historical errors and that staff were promptly reimbursed, but was ordered to pay the money, plus a £3.2million fine for breaches such as deducting wages for uniforms and expenses, or failing to pay of wages to repay the correct apprenticeship quota.
Has it gone broke?
McColl’s said if talks with potential lenders were unsuccessful, the group would be “increasingly likely” to be forced into administration.
It has now been confirmed that the chain has gone bust.
It is now expected to officially enter administration today (9 May) ahead of a pre-pack deal being finalised.
What happens next?
EG, the gas station giant that also operates supermarket giant Asda, pioneered the rescue of McColl’s.
However, it is understood that EG and Morrisons both submitted late extended proposals before the Administrators’ bid deadline on Sunday (May 8).
EG reportedly gave in to pressure to take care of McColl’s pension obligations, a move that will help its 2,000 members avoid a 20 percent cut in their guaranteed pensions throughout their careers.
Trustees of McColl’s pension funds have urged Economy Minister Kwasi Kwarteng to do everything possible to protect members.
Early Morrisons proposals were reportedly rebuffed by lenders, who preferred EG’s offer to settle McColl’s more than £160million debt outright.
It is now believed that Morrisons recently said it would also repay lenders in cash.
The EG Group has reportedly proposed keeping the retailer’s sites and staff, and has committed to raising the lowest wage rate for McColl’s staff to £10.05.
However, it is expected that any sale to EG will result in a short-term disruption in supply to McColl stores.
Because if his attempt to buy fails, it’s expected that Morrisons – McColl’s existing wholesale delivery partner – will terminate its agreement with the convenience store.