Modella, owner of former WH Smith stores, plans to change Post Office contracts, risking the closure of up to 60 outlets and creating 'postal deserts.' The restructuring could lead to the shutdown of 150 TG Jones stores and thousands of job losses.
Key points
Modella plans to change Post Office contracts for easier closures
Up to 60 post office outlets could be closed
Restructuring may lead to 150 TG Jones store closures
Modella's proposal includes reducing notice period for closures
Eight stores will definitely close, affecting seven Post Offices
Mentioned in this story
ModellaPost OfficeTG JonesWH Smith
The owner of WH Smith’s former high street business is aiming to change contracts with the Post Office to make it easier to close outlets within its stores, increasing fears that communities will become “postal deserts”.
TG Jones operates 180 post offices and it is understood that as many as 60 could be closed under a restructuring plan by Modella, the private equity group that renamed the WH Smith high street chain as TG Jones after buying it last year.
Modella’s proposal involves slashing rents on dozens of the books-to-paperclip chain’s outlets. Landlords are expected to recall the lease on the shops rather than accept the rent cuts, leading to up to 150 of the 450 TG Jones stores being shut, putting thousands of jobs at risk.
Modella has written to creditors saying it will amend Post Office contracts so that outlets that lose their leases can be closed with just 56 days’ notice – less than a third of the current notice period of six months – if the restructuring plan is approved. Creditors are to vote on the plan next month.
Eight stores will definitely close, seven of which house Post Offices: in East Ham and Waltham Cross in London; Torquay in Devon; Hull; Ayr; Middleton in Greater Manchester; and Solihull in the West Midlands.
The closure of a store housing a Post Office counter would mean the stamps-to-banking service would be forced to try to find another local site or shut down in that area all together.
The decision was criticised by the Communications Workers Union (CWU), the main union for postal workers.
Mole Meade, a member of the CWU executive council, said the communities served by Post Offices that would close under TG Jones’s plans would “become postal deserts in a modern world”.
At the time of Modella’s takeover, the CWU called for “cast-iron guarantees” that terms and conditions for workers would be protected amid fears the private equity firm could be “carpet baggers looking to asset strip it”.
Meade said this week: “We have been warning governments of all colours for nearly 35 years that outsourcing important social services like the Post Office to companies will put shareholders before communities we serve. All they will do is end up closing down community and crown post offices.”
Q&A
What are the potential impacts of Modella's restructuring plan on post office locations?
Modella's restructuring plan could lead to the closure of up to 60 post office outlets, significantly impacting communities and potentially creating 'postal deserts.'
How many TG Jones stores are at risk of closure due to the proposed changes?
Up to 150 of the 450 TG Jones stores are at risk of closure as a result of the proposed restructuring plan.
What changes are being proposed for Post Office contracts by Modella?
Modella proposes to amend Post Office contracts to allow closures with just 56 days' notice instead of the current six months if leases are lost.
Which specific stores will definitely close under the new plan?
Eight stores will definitely close, including seven with Post Offices located in East Ham, Waltham Cross, Torquay, Hull, Ayr, Middleton, and Solihull.
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Other rights for compensation are also set to be waived for stores affected by Modella’s restructuring plan, according to a document sent to creditors and seen by the Guardian.
Instead, the document says, the Post Office will be a offered a payment equivalent to 170% of the estimated profits earned from closure of a site – such as from the sale of stock. That figure will be underpinned at a minimum of £500.
The reduced notice period and compensation will be in place during the three-year period of the restructure plan to June 2029 and then the Post Office’s rights will return to normal.
Last week, Modella said the survival of the “iconic 234-year-old business” was its “imperative” amid weak consumer spending and rising operating costs. It said the forced name change from WH Smith also negatively affected trade so that it was likely to have to close stores and cut jobs.
The private equity group added: “The restructuring plan is designed to protect the substantial core of the store estate 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 who have pledged their support, including the Post Office and Toys R Us.”
Shortly after the deal, Modella promised landlords it would expand TG Jones to be the “hub of the high street”, with 500 outlets that would combine postal and banking services with learning, play and reading products.
Modella has said that the Post Office has “pledged their support” for the restructure plan and is understood to be aiming to rehouse Post Offices lost under the restructure in other businesses it owns, such as the Hobbycraft chain.
A Post Office spokesperson said: “We fully recognise the challenging trading conditions that TG Jones and many other high street retailers are facing at the moment.
“It’s regrettable that following the restructuring plan announcement by TG Jones on 7 May, a small number of Post Office branches inside TG Jones stores will close in the coming months. We are working hard to find locations nearby to continue offering Post Office services.
“We have a longstanding partnership with TG Jones and we know that post offices drive significant footfall to the high street.
“We will continue to work closely with TG Jones to understand what impact the restructuring plan could have on other stores that host post offices and are potentially at risk of closure. We will also continue to support the many branches inside TG Jones stores not impacted by this announcement, serving thousands of customers every week.”
The WH Smith travel stores, in railway stations, hospitals and airports, were not part of the Modella deal. and remain owned by its original stock market-listed parent company.
Modella declined to comment on the latest developments.
