Poundland unable to buy new stock as fears over collapse grow

Image source, Getty Images By Emma Simpson , Business correspondent and Simon Jack , Business editor Published 13 minutes ago Poundland is unable to buy new stock to fill its shelves after being blocked by its owners from accessing cash in its bank accounts.

The discount chain is on the brink of collapse with one insider describing it as "running on fumes". It has until Thursday to secure a rescue deal

About £50m has been frozen by its American owner Gordon Brothers, the BBC understands, meaning its 600 shops are running out of stock.

Pressure is building on Gordon Brothers, which bought Poundland for £1 last June, after the owner rejected a takeover bid that could have saved the thousands of jobs currently at risk. Gordon Brothers has been approached for comment.

Poundland has filed a notice of intention to appoint administrators, which protects it from its creditors until Thursday.

Access to funds was limited because of a tension between Gordon Brothers' dual role as both creditor and shareholder, a source said, but added they expected a relaxation of funds in the next two days.

Last week, Poundland boss Barry Williams told staff like-for-like sales, which exclude new store openings, were up 11.4% last week, which included Halloween, but said this was £1.5m ahead of budget.

He said the business made a profit of £18.1m in the year to September, which was a "strong recovery" from the previous year where the business made losses of £68m.

Burnham 'ready to support' Poundland staff as retailer faces collapse

However, Gordon Brothers has painted a different picture of the business, saying the chain remains "challenged and vulnerable to any potential downturn in future trading".

It said it had provided significant funding to support the company's ability to trade since it acquired the business.

It has also made £18m, from a combination of debt interest payments and other fees and charges.

On Wednesday, executives from Gordon Brothers will appear before the Business Select Committee with MPs probing whether they are genuinely pursuing a solvent rescue of the business, which has 11,000 employees, and whether every realistic step is being taken to protect jobs and stores.