At a central London branch of House of Fraser on 13 August, there was little to suggest that great change was under way. The ground floor was a familiar fug of competing perfumes, and in the carpeted halls, shoppers thumbed through racks of dresses and inspected price tags as they have done for 169 years. Of the five staff I spoke to in the store, only four were aware that their employer had been sold. “I know people who have been here a long time,” one young worker told me, “so it [the £90m sale of House of Fraser to Sports Direct] was a big relief to them.”
The relief might have been tempered had they known more about Mike Ashley, their new proprietor. But only two said they’d heard of him, and neither wanted to offer an opinion on the man who now controls a considerable portion of the ailing British high street. Along with the 700-store Sports Direct, Ashley, who is 53 and worth an estimated £2.8bn, has large stakes in Debenhams, Blacks, Millets and JD Sports, and has bought brands such as Dunlop, Slazenger, Lonsdale, Kangol, Karrimor and Umbro. Since 2007, he has owned Newcastle United Football Club, to the dismay of many fans.
Along with fellow billionaire Philip Green, Ashley became one of the unacceptable faces of capitalism in 2016 when the Commons business committee investigated reports of appalling working conditions at Sports Direct. After trade union officials from Unite told the committee that an employee at the Shirebrook distribution centre in Derbyshire gave birth to her child in a warehouse toilet because she feared being penalised for missing work – just one of 76 incidents in which an ambulance or paramedic was called to the building’s postcode in less than two years – Sports Direct arranged an “open day” at the site to improve the company’s reputation. Emptying his pockets at the security search point, Ashley pulled out a fist-sized wad of £50 notes. “I’ve been to the casino,” he explained.
Michael James Wallace Ashley was born in Walsall in 1964 and grew up in Buckinghamshire. He left Burnham Grammar School at 16 with just one O-level – a C in economics. But his parents mortgaged their bungalow in 1982 to raise £10,000 for Ashley’s purchase of a sports shop in Maidenhead, Berkshire. By the 1990s, the young entrepreneur had opened more than 50 stores. Sports Direct was floated on the stock exchange in 2007, with Ashley selling a 43 per cent stake for £929m and retaining ownership of the remainder.
The reclusive mogul, who loathes publicity, married Swedish property developer Linda Jerlmyr in 1988. The couple, who have three children, divorced in 2003 (at an estimated cost to Ashley of £50m) but rekindled their relationship in 2016.
Last year, Jeffrey Blue, a former Merrill Lynch banker who helped float Sports Direct, sued Ashley over £15m the tycoon allegedly promised him in a pub. Blue was unsuccessful, but the court heard that Ashley had “napped” under tables during meetings, and how, at one “management meeting” – again, in a pub – the billionaire challenged a young analyst to a drinking contest, sank 12 pints and vomited into a fireplace, “to huge applause from his senior management team”. In a typically unmediated response, Ashley called Blue’s testimony “utter bullshit”.
House of Fraser went into administration at 8am on 10 August; by 9am, the business and its assets had been sold to Sports Direct. The swift sale was enabled by a controversial type of insolvency known as a “pre-pack” sale, in which the administrator lines up a buyer and agrees the conditions of the deal in private.
Because the deal took place after the company had gone into administration (albeit for less than an hour) Ashley was able to shed obligations such as the company’s debts to suppliers – thought to be around £70m – and the pension liabilities of 10,000 current and former employees, which could cost £170m. It’s likely the pensions will be transferred into the Pension Protection Fund, which offers security but would also reduce payments. Thousands of older workers may now face a less comfortable retirement.
Ashley has pledged to keep 80 per cent of stores open and to transform House of Fraser into the “Harrods of the high street”; if this is true, the chain’s dented pensions and unpaid suppliers may have bought thousands of jobs.
It’s understandable, then, that staff may feel more relief than concern about Ashley’s antics. And while many people deplore his business model, he is far from the only person using it. At other companies, cheap clothes are bought at the expense of people who face being sacked for not agreeing to random searches, or for taking too long to go to the toilet, according to workers’ claims. For staff walking upwards of ten miles a day fulfilling online orders, it doesn’t matter if the person profiting from their situation is an oaf or a visionary. If Ashley has a workable plan to save the high street, he might even prove himself to be both.
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This article appears in the 15 Aug 2018 issue of the New Statesman, The inside story of Mossad