Cost of The Body Shop’s collapse must be disclosed, urge MPs

MPs have urged the insolvency watchdog to reveal the true cost of The Body Shop's collapse to taxpayers. 

In a letter to the Insolvency Service, Liam Byrne, Chairman of the Business and Trade Committee, has demanded answers over the British brand's redundancy bill and how many workers are eligible for payments, according to The Telegraph.

It comes as taxpayers are responsible for shouldering the redundancy costs of hundreds of sacked employees.

Around 500 workers have had their roles axed as part of restructuring the process of the brand’s UK business.

Affected employees were told by FRP to make a claim to the Redundancy Payments Service, which is funded using National Insurance contributions.

Byrne also asked Dean Beale, CEO of the regulator, whether administrators at FRP, which took over the UK arm of The Body Shop in last month, "are under investigation for any alleged breaches of the redundancy process".

He raised questions over why some employees were only notified of their sacking at a "moment’s notice".

A spokesperson for FRP said: "In normal circumstances an employer proposing to make redundancies would embark on a period of consultation with its employees, this is rarely possible in insolvency where the options available are limited, particularly in an unpredictable and challenging trading environment. Administrators must also consider their own duty to creditors and wider statutory obligations."

The Insolvency Service has been given until 23 March to respond to questions from Byrne.

The Body Shop collapsed into administration in the UK last month, shortly after new owners, European private equity firm Aurelius, took control of the business.

FRP later said it was looking into allegations of unaccounted funds that predate The Body Shop's sale to private equity firm Aurelius.

Scrutiny has also be intensified by figures previously seen by The Telegraph, revealing that the company's UK retail arm posted profits of £19 million on revenues of £163 million ahead of its fall into administration, thus triggering questions about why an insolvency process was necessary.

It comes as The Body Shop's administrators are closing dozens of shops despite them being profitable.

Although FRP said 82 of the brand's UK shops will shut over the next four to six weeks, other internal company documents found that just eight of its 206 UK stores were loss-making last year.

The brand's stores in Ipswich and Hempstead Valley are closing despite respectively contributing £99,000 and £97,000 of underlying profit in 2023.

However, a source close to FRP told The Sunday Times that the closures are based on expected profitability for this year and that the stores were typically loss-making until the final two months.

It added that the reduced store footprint coincides with a renewed focus on the British brand’s products, online sales channels and wholesale strategies, aiming to "bring the brand in line with industry peers and supporting a return to financial stability".