Fears of ‘postal deserts’ as owner of former WH Smith stores puts counters under threat | WH Smith
The owner of former WH Smith high street business aims to change contracts with the Post Office to make it easier to close outlets in its stores, raising fears that communities will become “postal deserts”.
TG Jones has 180 post offices and it is understood as many as 60 could be closed under a restructuring plan by private equity group Modella, which changed its name to TG Jones after buying the WH Smith high street chain last year.
Modella’s proposal includes reducing rents at dozens of the book-to-paperclip chain’s outlets. Landlords are expected to recall stores’ leases rather than accept rent cuts; This has led to the closure of nearly 150 of 450 TG Jones stores, putting thousands of jobs at risk.
Modella has written to creditors saying that if the restructuring plan is approved, it will amend Post Office contracts to ensure that outlets losing their leases can be closed with just 56 days’ notice (less than a third of the current six-month notice period). Creditors will vote on the plan next month.
Eight stores will definitely close, seven of which house the Post Office: in East Ham and Waltham Cross in London; Torquay in Devon; body; Ayr; Middleton in Greater Manchester; and Solihull in the West Midlands.
The closure of a store where the post office counter is located will mean that the stamp-banking service will be forced to find another local site or will be closed completely in that area.
The decision was criticized by the Communications Workers Union (CWU), the main union for postal workers.
CWU board member Mole Meade said the communities served by Post Offices that would be closed under TG Jones’ plans would “become postal deserts in a modern world”.
At the time of the Modella takeover, the CWU had called for “cast iron guarantees” that terms and conditions for workers would be protected, amid fears that the private equity firm could be “carpetbaggers looking to destroy its existence”.
Meade said this week: “For almost 35 years we have been warning governments of all colors that handing over important social services like the Post Office to corporations would put shareholders ahead of the communities we serve. All they would do is close community and crown post offices.”
Other compensation rights will also be waived for stores affected by Modella’s restructuring plan, according to a document sent to creditors and seen by the Guardian.
The document says the Post Office will instead be offered a payment equivalent to 170% of the estimated profit from closing a site (e.g. selling stock). This figure will be supported by at least £500.
The reduced notice period and compensation will apply for the three-year period of the restructuring plan until June 2029, after which the Post Office’s rights will return to normal.
Last week, Modella said it was “imperative” for the “234-year-old iconic business” to survive in the face of weak consumer spending and rising operating costs. He said WH Smith’s forced name change was also having a negative impact on trading, so it would likely have to close stores and cut jobs.
The private equity group added: “The restructuring plan is designed to preserve the important core of the store site and create a stronger, more sustainable business that can continue to serve customers for years to come. We are extremely grateful to the many stakeholders, including the Post Office and Toys R Us, who have pledged their support.”
Shortly after the deal, Modella promised homeowners that it would turn TG Jones into the “hub of the high street” with 500 outlets that would combine postal and banking services with learning, gaming and reading products.
Modella said the Post Office had “pledged its support” to the restructuring plan and was understood to be aiming to re-house Post Offices lost to restructuring at other businesses it owns, such as the Hobbycraft chain.
A Post Office spokesman said: “We are fully aware of the difficult trading conditions currently faced by TG Jones and many other high street retailers.
“It is regrettable that a small number of Post Office branches within TG Jones stores will close in the coming months, following TG Jones’ announcement of a restructuring plan on 7 May. “We are working hard to find locations nearby to continue providing Post Office services.
“We have a long-standing partnership with TG Jones and know that post offices attract significant footfall to the high street.
“We will continue to work closely with TG Jones to understand what impacts the restructuring plan may have on other stores that host post offices and are potentially at risk of closure. We will also continue to support the many branches within TG Jones stores that are not affected by this announcement and serve thousands of customers each week.”
Still reeling from the Horizon IT scandal, the state-owned Post Office has announced the closure of more than 100 branches in late 2024.
WH Smith travel stores in train stations, hospitals and airports were not part of the Modella deal. and will continue to be owned by its original publicly traded parent company.
Modella declined to comment on the latest developments.
