The collapse of BHS could be the “final nail in the coffin” for some manufacturing firms, sources have told Drapers.
At least two more UK-based Bhs suppliers have been forced to begin making redundancies a week after administrators confirmed the high street chain will be liquidated, sources said. One manufactures jersey separates, and the other women’s outerwear, Drapers understands.
It comes after BHS suppliers Courtaulds and sister company CUK Clothing went into administration on May 26, resulting in the loss of 350 jobs. The two companies – which produced hosiery, socks, bras, underwear, nightwear, formalwear, casualwear, jackets and coats – blamed the demise of their “major” client BHS, as well as declining sales and profitability.
“It is a nightmare and a few of us will go under because of it,” one BHS supplier told Drapers this week. “Suppliers are laying off staff because of it and it will have a knock-on effect on the factories they use. We have had no communication with the administrators since the collapse. I understand that they have their hands full but it’s still not satisfactory.”
He added: “It’s an awful situation – bad for [former BHS owner Sir] Philip Green, bad for the employees and bad for the suppliers. We often pay for the mess retailers make of their businesses.”
Drapers understands the administrators, Duff & Phelps, were under no obligation to inform creditors of the failure to find a buyer for BHS. Creditors will receive letters in the coming days notifying them of future plans for the business.
“Some BHS suppliers have already been making redundancies,” confirmed one headhunter. “For a lot of suppliers, BHS was one of their main accounts, so there has been a big fallout. A lot won’t be able to weather the storm.”
Another source pointed out that many suppliers were wary of working with BHS, but had no choice, particularly following Marks & Spencer’s decision two years ago to directly source more of its clothing.
“[Courtaulds] found itself in a desperate situation after M&S pulled its business,” she said. “They were going in with [BHS with] their eyes wide open, but it’s still very tough. BHS was the final nail in the coffin.”
Another BHS supplier said the 11,000 BHS staff were the “biggest losers” in the situation.
BHS employs around 8,000 people and has 163 stores across the UK. There are a further 3,000 people on contracts but not directly employed.
Staff are collectively expected to receive a total of between £8m and £12m in redundancy payments from the government.
Many are expected to find jobs at department stores, value retailers and supermarkets.
“Department stores like House of Fraser and Debenhams, as they have the spread across the menswear, womenswear and kidswear departments. Pep&Co are doing a lot of recruiting and they are in that value sphere, so they will be looking too,” said Shelley Pinto, managing director of TRP Recruitment.
However she added that many staff may not want to move out of London, where BHS is based.