Shop Direct, the UK retail group owned by the Barclay brothers, could collapse unless it finds £150m to cover the costs of payment protection insurance (PPI) compensation, its auditor has warned.
The Littlewoods.com and Very.co.uk owner last week revealed it had seen higher-than-expected demand for PPI compensation with payouts coming to £169m in the year to 30 June.
Its business model centres on selling clothes, electrical goods and homeware to customers on credit. The claims from customers left Liverpool-based Shop Direct needing £150m to plug a gap.
In its latest accounts, published today, Shop Direct’s auditor Deloitte said it was not yet clear where the money will come from. This means there is “material uncertainty… about the group and parent company’s ability to continue as a going concern”.
Its accounts said that “the group experienced a material increase in the volume of customer redress claims” for PPI in the week leading up to the watchdog’s deadline of 29 August.
“The group saw the volume of submitted claims increase to more than 276,000 in August 2019 versus the average monthly run rate of approximately 40,000 claims,” the accounts said.
It added that due to the funding gap, “the group and company may be unable to realise their assets and discharge their liabilities in the normal course of business”.
The funding difficulties come as Sir David and Sir Frederick Barclay, Shop Direct’s owners, seek to break up their empire, according to reports.
It includes the Ritz hotel in London and the Telegraph Media Group, the latter of which posted substantial profit losses this year.
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