Woolworths demise 15 years on: What happened at the retail giant and could it come back?
Parachuted in to turn around a failing giant of the British high street, Robert McDonald was part of Woolworths’s last roll of the dice.
The new finance director said he was excited to join an “iconic” brand when he began work in early November 2008, but just three weeks later the company would sink into administration.
And there was little the company’s last ever executive hire could do to stop the famous store – known for its pick ‘n’ mix, homeware and everything in between – from closing for good on 6 January 2009.
“Like everyone my age, I had grown up thinking its existence was a normal part of life,” Mr McDonald told Sky News.
“I was very pleased to have the opportunity to work there. I knew it was going through hard times and looked forward to being able to help.
“But, sadly, it was past that by the time I joined, and the end seemed very swift.”
Analysts blame its downfall on a toxic combination of low cash reserves, lost credit insurance and crippling debt – all exacerbated by the 2008 financial crisis.
It marked the end of Woolies’s near century-long presence on the high street, with more than 800 stores closed down and about 27,000 jobs lost.
Woolworths was popular for its pic ‘n’ mix
For many of its staff, news of Woolworths’s demise into administration came from the media, with earlier rumours confirmed in reports on 26 November 2008.
Paul Seaton, who had worked as a store manager and as part of the IT team during 25 years at the company, said his colleagues “crowded around the TV” to hear their worst fears confirmed.
“It just all fell to pieces after that,” Mr Seaton, now 61, told Sky News.
“The sad reality is Woolworths took 99 years to build, and it took 42 days from administration to the day the last door shut. 99 years of meticulous care and thought… gone.”
The board insisted administration wouldn’t detract from “business as usual”, Mr Seaton said, but that all changed when he was called to a meeting on 5 December.
He was among 500 senior figures gathered at Woolworths HQ, where each was given a letter written by administrators Deloitte notifying none would be paid another day and all had lost their jobs with immediate effect.
The notice given by Deloitte to Paul Seaton
“We were summoned and told not to come back, all 500 of us,” Mr Seaton said, adding their passes into the building were deactivated on the spot. “The business only carried on for one month after that.”
While his time at the company came to an abrupt end, he dedicated time to creating a virtual Woolworths museum, preserving memorabilia and documenting the chain’s long history.
A store for the family
The first store opened in November 1909 in Liverpool, by New Yorker Frank Woolworth, who had already established the brand in the US.
In a prescient diary entry, he wrote during an earlier trip to Europe that “a good penny and sixpence store, run by a live Yankee, would be a sensation here”.
Such was the success of the UK counterpart, his successor Byron Miller reportedly beamed that “the child has long since outgrown the parent”.
Mr Seaton thinks the literal child-parent relationship was key to the store’s popularity.
“There used to be old adage that people need Tesco because everyone has to eat, and people trust Boots because you call the manager ‘doctor’, but they went to Woolworths because they love Woolworths,” he said.
“Have you ever heard a kid saying ‘mum I want to go to Tesco’? The whole reason I loved being a manager is kids and families loved coming to Woolworths.”
Paul Seaton with Woolworths memorabilia collected over the years
The store’s name lives on in Australia – though has no connection with US or UK equivalents – where it is the country’s largest supermarket chain and last year recorded a net profit of $1.62bn (about £87bn).
US stores closed in 1997, but the UK branches recorded a record profit topping £100m just one year later.
What went wrong?
Customers were still shopping at the UK stores, and in the firm’s final annual report the company made a slight pre-tax profit in 2007.
But even with some signs of recovery ahead of 2008, Woolworths had a terminal problem: modest cash flow and a £385m mountain of debt.
Retail expert Clare Bailey was among the consultants drafted in 2006 to tackle the mammoth task of detangling the company’s supply chain, which she says was collecting too much of some stock and too little of others.
As banks began to lose faith in Woolworths’s finances, the firm had its credit insurance withdrawn – meaning it had to pay suppliers immediately, rather than in instalments.
To make matters worse, many Woolworths stores were sold a few years before and rented back at a price that only appeared to increase over the years.
Left with fewer assets, little in way of cash reserves and no credit insurance, the retailer was not prepared for the coming shock of the 2008 financial crisis.
“Cashflow is like oxygen,” Ms Bailey told Sky News. “You can be profitable, but if you haven’t got cash to pay bills or for when something goes wrong, then that’s it – game over.”
The company reported a pre-tax loss of £90.8m over the first half of 2008 in September that year, despite launching the WorthIt range – promoting low-cost products – in 2007.
Losing sales and customers
One of the big issues Ms Bailey identified in the supply chain was a failure to keep evergreen products on shelves.
For example, she said only 20 stores out of more than 800 nationwide had the correct amount of coat hangers, a product that sells all year, while others bought far too many Christmas trees.
It meant money was “trapped in stocks”, she said, and would gradually turn customers away.
“And if you replicate that through other products, customers could find what they didn’t want, but not what they wanted,” she said.
“You might, as a customer, give them the benefit of the doubt a few times, but eventually they will turn to other places. So, they not only lost the sale – they also lost the customers.”
It’s this perceived neglect of the customer journey that small business growth expert Claire Hancott believes cost Woolworths at the turn of the century.
Footfall almost halved from 7.5 million in 2000 to around 4.5 million in 2007, she said, while the market for Woolworths’s once-popular CDs was shrinking as more consumers headed to the internet.
“Businesses can’t ignore these big trends, even if they won’t come into play for years,” Ms Hancott told Sky News.
“Blockbusters was a classic example, when they thought digital films wouldn’t take off.
“Woolworths wasn’t at the forefront of consumer technology and it’s so important to be looking 10, 20 years into the future – it takes a long time to prepare.”
Discount stores such as pound shops began to pop up on the high street, adding to growing competition that ultimately forced an attempt to sell the company in November 2008 for – ironically – just £1.
It was hoped a sale to restructuring experts Hilco would give them the job of repaying the debt, but the banks rejected the move.
The company went into administration just days later.
A false dawn, but will the sun rise on Woolworths again?
Ever since the company collapsed under the weight of its debt, rumours of a potential return to the high street have never been completely quashed.
A fake announcement – made by a social media account falsely claiming to be run by Woolworths – heralding a comeback was met with excitement in 2020, with savings platform Raisin UK reporting 44% of people discussing the store’s revival online “loved the news”.
The post turned out to be false
In August 2022, pollsters at YouGov found 49% of survey respondents said they wished they could bring back Woolies – a far higher proportion than any other defunct chain.
But for all the hopes of an encore, some of those involved with the firm rue the time that has since been lost – and believe it may have even survived.
“I came in at the end of 2006, but the work we were doing can take three or five years,” Ms Bailey said. “Maybe they started too late.”
All but a small handful of the Woolworths stores were re-let to other retailers within a decade, she added, meaning the spaces “still had merit in the local community”.
“The inner workings of a business are quite complicated,” she said.
“But I think it’s a sad situation it collapsed, because – had they been given a stay of execution – they may well have been successful in turning it around.”
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Ms Hancott agrees: “In another time, would it have crumbled? That’s the million-pound question that nobody will be able to answer.
“Had it not been in the midst of a crisis, then it may have survived.”
For Mr McDonald, a chance to draw on his experience handling company finances never materialised.
It was, nonetheless, a “fascinating experience”, he said.
“It’s such a shame we didn’t have longer to turn that business around,” he said.
“I joined as part of a turnaround plan, but it was too late to change the course of history.”
The banking sector is “investing heavily” in digital platforms, according to the body which represents the country’s lenders as many face a backlash over the latest payday glitch chaos to hit customers.
Millions were exposed on Friday to varying challenges from slow app or online banking performance to being blocked out of their accounts altogether.
Users said the brands caught up in the issues – which did not appear to be the result of a single problem – included Lloyds, Halifax, Nationwide, TSB, Bank of Scotland and First Direct.
It marked the second month in a row for payday problems and no reasons have been given for them.
Money latest: How is my bank affected by banking glitch?
The industry has been historically reluctant to talk about the common challenges but its mouthpiece, UK Finance, told Sky News there was help available and protections in place during times of disruption while acknowledging customer frustrations.
The body spoke up as MPs and regulators take a greater interest in the resilience issue due to mounting concerns over the number of glitches.
All this comes at a time when major lenders face criticism for continuing to cut branch services at a regular pace – blaming ever higher demand for online services.
The UK’s big banking brands have been shutting branches since the fallout from the financial crisis in 2008, which sparked a rush to cut costs.
The uptake of digital banking services has seen more than 6,200 sites go to the wall since 2015, according to the consumer group Which?
The latest closures were revealed last month by Lloyds – Britain’s biggest mortgage lender.
Lloyds revealed in January that it was cutting a further 130+ branches from its network of brands. Pic: Reuters
Its announcements meant that it planned, across the group, to have just 386 Lloyds-branded branches left, with Halifax down to 281.
Bank of Scotland would have just 90 once the closure programme was completed.
Critics have long accused the industry of failing to sufficiently invest their branch closure savings in better online services.
But a UK Finance spokesperson said: “All banks invest heavily in their systems and technology to ensure customers have easy access to banking services.
“Where issues arise, they work extremely hard to rectify them quickly and to support their customers.
“Banks have been posting information on their websites and social media accounts to ensure they keep customers updated.”
Are banks doing enough?
Earlier this month, The Treasury committee of MPs wrote to bank bosses to request information on the scale and impact of IT failures over the past two years.
Their responses should have been received by Wednesday.
The letters followed an outage at Barclays which led to some customers being unable to access some services for up to three days from Friday 31 January.
The day marked HMRC’s self-assessment deadline alongside pay day.
The Bank of England has also been taking a greater interest in the issue for financial stability reasons.
The MPs sought data from the banks on the volumes of customers affected by glitches – and the compensation that had been offered.
Committee chair, Dame Meg Hillier, said then: “When a bank’s IT system goes down, it can be a real problem for our constituents who were relying on accessing certain services so they can buy food or pay bills.
“For it to happen at a major bank such as Barclays at such a crucial time of year is either bad luck or bad planning. Either way, it’s important to learn what has happened and what will be done about it.
“The rapidly declining number of high street bank branches makes the impact of IT outages even more painful; that’s why I’ve decided to write to some of our biggest banks and building societies.”
Business
Council finances are becoming unsustainable and whole system overhaul is required, watchdog warns
From bin collections and parks to social care, it’s estimated local authorities in England provide more than 800 services for residents, touching on many different aspects of our lives all the way from childhood to elderly care.
A National Audit Office report found spending on services increased by £12.8bn – from £60bn to £72.8bn – between 2015-16 and 2023-24, a 21% increase in real terms.
Most of this increased spending – £10.3bn – has gone to adult and children’s social care, which represents councils’ biggest spend, increasing as a share of overall spending from 53% to 58% over the period.
Previous central funding cuts and an increasing population mean that spending power per person has largely stagnated, however, and remains 1% lower per person than in 2015/16, the report said.
This is a measure of the funding available to local authorities from central government grants, council tax and business rates. Though grant funding has increased in recent years, it has not yet made up for pre-2020 government cuts.
Complex needs
The population in England has increased by 5% over the period, accounting for some of this increased pressure, but it’s not the only driver.
In many areas, demand has outpaced population growth, as external events and the complexity of people’s needs has shifted over time.
The rapid increase in costs of temporary accommodation, for example, has been driven by the large increases in people facing homelessness because of inflationary pressures and housing shortages.
At the same time, demand for new adult social care plans has increased by 15%.
As life expectancies have increased, the length of time in people’s lives during which they suffer from health problems has also increased.
“We see that in adult social care that people have multiple conditions and need more and more support and often will be appearing as if they’re frailer at an earlier age. So that’s an important trend,” explained Melanie Williams, president of the Association of Directors of Adult Social Services.
“We’re constantly focusing on most urgent things at the expense of not doing the preventative work,” she added.
“When we’re just focusing on getting people home from hospital, we’re not doing that piece of work to enable them not to go there in the first place.”
Budget cliff edge over SEND spending
Meanwhile, demand for education, health and care (EHC) plans, for children with more complex special educational support needs has more than doubled, increasing by 140% to 576,000.
Budgets for special educational needs and disabilities (SEND) have not kept pace, meaning local authority spending has consistently outstripped government funding, leading to substantial deficits in council budgets.
Most authorities with responsibilities for SEND have overspent their budget as they have been allowed to until March 2026 on a temporary override, but they will need to draw on their own reserves to make these payments in a year.
One in three councils will have deficits that they can’t cover when the override ends.
Cuts to services
In the latest figures for 2023/24, the NAO found £3 in every £5 of services spending by English local authorities went towards social care and education, totalling £42.3bn.
This has left little headroom for other services, many of which have experienced real-terms financial cuts over the same time period, with councils forced to identify other services like libraries, parks and the arts to make savings.
But, Williams warned, cultural and environmental services like these can play a vital role in wellbeing and may actually exacerbate demand for social care.
“For us to be able to safeguard both adults and children – so people that need extra support – we do need that wider bit for councils to do,” said Williams, who also serves as corporate director of adult social care for Nottingham County Council.
“It’s no good me just providing care and support if somebody can’t go out and access a park, or go out and access leisure, or go out and have that wider support in the community.”
Commenting on the report, Cllr Tim Oliver, chairman of the County Councils Network, said: “As we have warned, councils have little choice but to spend more and more on the most demand-intensive services, at the expense of everything else – leaving them providing little more than care services.
“It is market-specific cost pressures, mainly in adult social care, children’s services, and special educational needs, that are driving councils’ costs rather than deprivation. Therefore government must recognise and address these pressures in its fair funding review, otherwise it will push many well-run councils to the brink.”
Fighting fires
The NAO report describes a vicious cycle where councils’ limited budgets have resulted in a focus on reactive care addressing the most urgent needs.
More efficient preventative care that could lower demand in the long term has fallen to the wayside.
In one example cited by the NAO, the Public Health Grant, which funds preventative health services, is expected to fall in real terms by £846m (20.1%) between 2015/16 and 2024/25.
Other areas have seen a switch in funding from prevention to late intervention.
Councils’ funding towards homelessness support services increased by £1.57bn between 2015/16 and 2013/24, while money for preventative and other housing services fell by £0.64bn.
Financing overhaul needed
Since 2018, seven councils have issued section 114 notices, which indicate that a council’s planned spending will breach the Local Government Finance Act when the local authority believes it’s become unable to balance its budget.
And 42 local authorities have received over £5bn of support through the Exceptional Financial Support (EFS) framework since its introduction in 2020.
According to a recent Local Government Association survey referenced in the NAO report, up to 44% of councils believe they’ll have to issue a section 114 notice within the next two years should the UK government cease providing exceptional financial support.
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Looking ahead to upcoming funding settlements, and the government’s planned reforms of local government, the NAO warns that short-term measures to address acute funding shortfalls have not addressed the systemic weaknesses in the funding model, with a whole system overhaul required.
Sir Geoffrey Clifton-Brown, chair of the Committee of Public Accounts, said: “Short-term support is a sticking plaster to the underlying pressures facing local authorities. Delays in local audits are further undermining public confidence in local government finances.
“There needs to be a cross-government approach to local government finance reform, which must deliver effective accountability and value for money for taxpayers.”
The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open-source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.
Business
Victims of second Post Office scandal criticise ‘grinding wheels of bureaucracy’ as they try to get compensation
Victims of ‘Capture’, a second faulty Post Office accounting system, say their redress scheme may not be in place until the autumn.
Former sub-postmasters and their relatives met with government representatives for an update on compensation.
While lawyers describe “positive steps”, some victims have told Sky News that they are disappointed with the timescale and described coming up against the “grinding wheels of bureaucracy”.
Capture software was an accounting system rolled out in Post Office branches between 1992 and 1999 and was likely to have caused false shortfalls.
It was the predecessor to Horizon, which led to hundreds of sub-postmasters being wrongly convicted of stealing between 1999 and 2015.
Former sub-postmaster Lee Bowerman, who was never accused of stealing but had to sell his Post Office business after using Capture, said the meeting was a “damp squib” and criticised “the grinding wheels of bureaucracy”.
He agreed that the proposed redress scheme would be “quicker than Horizon” but added “you can’t use them as a yardstick because at the end of the day …people still haven’t been paid out”.
Mr Bowerman added: “So don’t compare us to them when those schemes aren’t even fit for purpose.”
Around 100 Capture victims so far could be eligible for redress.
The scheme, however, would not apply to anyone currently convicted.
The Criminal Cases Review Commission (CCRC) have confirmed that they are now reviewing 27 Capture convictions.
Victims were told the government is considering a separate “fast track” redress scheme for anyone who has their conviction overturned in the future.
Lee Bowerman had to sell his Post Office business after using Capture
Steve Marston’s case is among those being considered after he was convicted of stealing from his branch in 1996 following shortfalls of nearly £80,000.
“I don’t think it would be human nature not to be disappointed that [the redress scheme] is not being sorted out in the next couple of days even,” he said.
“But we are talking about the government, aren’t we? They’ve got to fill in a form in triplicate, get it rubber stamped three times and that’s for a box of paper clips,” he added.
“I mean it is what it is, we have got to roll with it, stick in there and keep pushing as much as we can”.
Clare Brennan, daughter of Peter Lloyd-Halt, who was a sub-postmaster accused of stealing whilst using Capture, said she and her mother Agnes found the meeting “positive”.
She went on to describe a “weight being lifted” after they were told that it had been officially recognised that Mr Lloyd-Halt had worked for the Post Office.
The family say all Mr Lloyd-Halt’s documents and evidence have been lost and it’s been a challenge to their case.
Lawyers for victims also described “positive steps” towards a new compensation scheme, following the government meeting.
Read more:
Sub-postmasters ‘still going through hell’
What is the Horizon Post Office scandal?
Agnes Lloyd-Holt and Clare Brennan
Neil Hudgell, of Hudgell Solicitors, said that they were “reassured by the Department for Business and Trade today that good progress is being made with learnings taken from previous Post Office compensation schemes to form this one”.
He added that “there is a clear willingness to do right by those who have suffered at the hands of the Post Office in relation to Capture”.
“We always appreciate that redress can never come quick enough for these victims and we push as much as we can to take things forward.”
A spokesperson from the Department for Business and Trade said: “Officials met with postmasters today as part of the government’s commitment to develop an effective and fair redress process that takes into account the circumstances of those affected by Capture.
“Ensuring postmasters are treated with dignity and respect is our absolute priority and we will continue to update on the development of the redress mechanism as it progresses.”
The next meeting with Capture victims is due in April.
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