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More than 31,000 jobs were under threat last night as the credit crunch claimed its first two big-name high street casualties - Woolworths and MFI.
Woolworths directors met at 6pm to formally call in administrators to take over the running of the 800-strong retail chain, which was founded in 1909 and is a cornerstone of high streets in hundreds of towns and cities. Accountants from Deloitte were standing by, ready to take control.
Woolworths gave up its struggle to survive just hours after MFI collapsed into administration when the furniture and fitted kitchens specialist was unable to meet rent demands. One in four MFI stores will not open today and 1,200 jobs at the 111-store chain are under threat.
The collapse of Woolworths came despite an eleventh-hour intervention by officials representing Lord Mandelson, who summoned the retailer's lenders to a late-night meeting on Tuesday, amid fears that the retailer might not be able to pay staff wages this week. The lenders - GMAC and Burdale, part of the Bank of Ireland group - were asked to do all they could to avoid the demise of the chain, which employs 25,000 staff, and at least keep them open, and the staff paid, for the next few weeks. They had provided loans of £385m to Woolworths.
A second Woolworths group company - EUK, which distributes DVDs and CDs to other retailers - has also gone into administration, even though it is a profitable operation. The demise of EUK, which has 5,000 staff, could hit the availability of music and movies in supermarkets such as Sainsbury and Morrisons, which are big customers of EUK.
Woolworths has been struggling for years, squeezed between the supermarkets, online retailers and specialist shops. It tried to reinvent itself as a specialist shop for children and families and more recently launched an online operation in an attempt to take on Argos. But every initiative failed.
In the summer the company sacked its chief executive and brought in a recovery specialist. Only three months ago multimillionaire Malcolm Walker, who runs the Iceland supermarket, said he wanted to buy Woolworths and offered £50m. But he was forced to drop his bid when the Icelandic bank backing it went bust.
In September the new boss, Steve Johnson, unveiled a £100m loss in just six months and criticised the previous management, saying the chain needed "a good dose of basic shopkeeping and attention to retail detail". He said half the stock was in the stockroom and questioned why Woolies sold "54 different types of pencil cases but not women's tights".
He said the chain had a bright future, but it has been brought to its knees by the economic downturn, at a time of the year when it should be raking in sales and profits. Woolworths has traditionally done more than 80% of its annual business in the six weeks before Christmas.
Woolworths refused to comment on its demise last night, but a source close to the talks said the business had "hit a brick wall". Suppliers were refusing to deliver stocks, creditors were demanding immediate payment of cash owed and staff were becoming increasingly anxious. It is not just jobs at stake: Woolworths' pension fund has a £100m deficit and about 8,000 current members, deferred members and pensioners.
The Woolworths parent group will not go into administration and will retain two smaller businesses, book distributor Bertrams and 2entertain, a joint venture with the BBC, which makes and sells DVDs of hit BBC shows such as Little Britain. The BBC has offered £100m to buy out Woolworths' 40% stake in 2entertain.
MFI, founded in the 1960s, has also been battling to survive for years. Staff wages have been paid up to date, but job losses are likely to start at once. The administrators said they hoped to fulfil or refund all customer orders and the retailer wrote to customers yesterday to reassure them that they will either get the goods they ordered or their money back.
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