Another week, another set of shop closures.Retailers and restaurant owners complain about rising costs, newspapers publish photographs of boarded-up shops, and inevitably somebody blames the Government.
There is some justification for this.
In April 2025 the National Living Wage increased by 6.7%, from £11.44 to £12.21 an hour. At the same time employers’ National Insurance increased from 13.8% to 15%, while the salary at which employers started paying it fell from £9,100 to £5,000. (GOV.UK) In April 2026 the minimum wage rose again, to £12.71. (GOV.UK).
There are good reasons for the Government to do this. Britain needs to move away from being a low wage, low skill, low investment economy. But these changes disproportionately affect businesses employing lots of relatively low-paid people, which is a pretty good description of retail and hospitality.So when retailers say that increasing employment costs are making marginal shops unviable, we shouldn’t dismiss them.
But there is a slight problem with blaming Rachel Reeves for the death of the British high street. It was dying long before she arrived.
Whatever happened to the high street?
Woolworths disappeared in 2008.
Borders went in 2009.
Comet disappeared in 2012.
BHS collapsed in 2016.
Maplin and Toys R Us disappeared in 2018.
Mothercare’s UK shops went in 2019.
Debenhams and Arcadia followed in 2020.
Wilko collapsed in 2023.
And alongside them went thousands of smaller shops and restaurants. The obvious explanation is the internet. And obviously the internet matters. Amazon and online shopping fundamentally changed retail. Supermarkets expanded into books, clothes, electrical goods and almost everything else. Retail parks offered free parking and enormous stores. Consumers changed what they bought and where they bought it.
Restaurants had their own problems: changing tastes, Deliveroo and other delivery services, rising rents and food costs, and eventually Covid.
But that isn’t quite the whole story.
Because something else happened to British retail during the same period. We changed not merely where we shopped, but who owned the shops and what they expected to get out of them.
Enter private equity
Private equity is pretty simple. A private equity fund raises money from investors and uses it to buy companies. It tries to improve their profitability or value and then sells them, hopefully for substantially more than it paid. Nothing inherently sinister about that.
If I buy a badly run shop for £1 million, improve its products, reduce waste, increase sales and sell it five years later for £2 million, everybody potentially wins. The interesting bit is how many private-equity acquisitions are financed.
Rather than putting up the whole purchase price, the buyer borrows a substantial proportion of it. And much of that debt sits with the company that has been bought.
Imagine I buy your restaurant for £1 million. I put in £200,000 and borrow £800,000.
I then effectively announce:
Congratulations. I own your restaurant. Also, your restaurant now has an £800,000 debt.
The restaurant’s customers didn’t change. Its food didn’t change. Its staff didn’t change. But it now has another mouth to feed: the financial structure sitting above it.
That is a leveraged buyout. And leverage can dramatically increase the return on the investor’s £200,000 if things go well. It can also make the restaurant considerably more likely to go bust if things go badly.
Financialisation
Private equity is actually only part of a broader phenomenon generally called financialisation.
A traditional retailer makes money something like this:
sell stuff → pay staff and suppliers → pay rent and overheads → keep the profit
A financialised business can acquire several additional claims on that cash:
sell stuff → pay staff and suppliers → pay rent → pay interest → pay management fees → service acquisition debt → pay investors
Property adds another possibility. A retailer owns 100 shops. Those buildings are valuable assets. Sell them to a property company and suddenly you have hundreds of millions of pounds in cash. Often more cash than the PE fund invested in the first place.
Excellent.
Except that the shops must now rent back the buildings they previously owned. An asset on the balance sheet has been transformed into a permanent operating expense.
Again, this can make perfect commercial sense. But repeat enough of these transactions and something important happens.
The operating business becomes more fragile. When sales fall 10%, a company with low debt and buildings it owns can cut its dividend, accept lower profits and wait for better times. A highly leveraged company paying interest and rent doesn’t necessarily have that luxury.
Debenhams
Debenhams is probably the perfect case study because it demonstrates how misleading it can be simply to look at who owns a business on the day it collapses. Debenhams wasn’t owned by private equity when it finally disappeared. It had been back on the stock market for years.
But rewind to 2003. A consortium consisting of TPG, CVC Capital Partners and Merrill Lynch Private Equity bought Debenhams for around £1.7 billion.The investors put approximately £600 million of their own money into the deal.
Over the next three years they extracted around £1.3 billion in dividends. Not bad for three years’ work.
But something else happened. When Debenhams was bought it had debt of roughly £100 million. By the time it returned to the stock market in 2006 its debt was around £1.2 billion. Its private-equity owners had made an enormous return, but Debenhams itself was now vastly more indebted.
The company also sold freehold property, while suppliers were reportedly made to wait longer for payment. Debenhams was floated back onto the stock market. The private-equity owners got their money out. The debt stayed with Debenhams.
It survived another thirteen years, so clearly private equity didn’t simply “killed Debenhams”. Lots of other things did. Department stores became less fashionable. Online shopping exploded. Debenhams became addicted to discounting. Its stores looked tired. Competitors improved. Consumer behaviour changed.
But what if Debenhams had entered the internet age owning more of its property and carrying £100 million of debt rather than more than £1 billion? It wouldn’t have guaranteed survival, but it would have had considerably more room to manoeuvre
That is what financialisation does. It doesn’t necessarily cause the storm. It removes the roof before the storm arrives.
Debenhams wasn’t unusual
Look at some of the biggest retail and restaurant crises of the past twenty years.
| Business | Crisis | Ownership around crisis | PE/financial investor | Importance of financialisation |
|---|---|---|---|---|
| Debenhams | 2019–20 | Listed; previously TPG/CVC/Merrill Lynch | Yes – legacy | Very high |
| Toys R Us UK | 2018 | KKR/Bain/Vornado | Yes | Very high |
| Maplin | 2018 | Rutland Partners | Yes | High |
| New Look | 2018–20 | Brait; previously Apax/Permira | Yes | High |
| The Body Shop | 2024 | Aurelius | Yes | Medium/uncertain |
| BHS | 2016 | Green family → Retail Acquisitions | No | Very high |
| Arcadia/Topshop | 2020 | Green family | No | Medium/high |
| Wilko | 2023 | Wilkinson family | No | Medium |
| Woolworths | 2008 | Listed | No | Medium |
| Mothercare UK | 2019 | Listed | No | Low/medium |
| House of Fraser | 2018 | Sanpower | No | Medium |
| Prezzo | 2018 onwards | TPG | Yes | High |
| Byron | 2018–20 | PE-backed | Yes | High |
| Gaucho/Cau | 2018 | Equistone | Yes | High |
| PizzaExpress | 2020 | Hony Capital | Yes | Very high |
| Casual Dining Group | 2020 | KKR/Pemberton/Apollo | Yes | High |
| Carluccio’s | 2020 | Landmark Group | No | Medium |
| Jamie’s Italian | 2019 | Private/Jamie Oliver | No | Medium |
| Restaurant Group | 2020 onwards | Listed | No | Low/medium |
This isn’t a scientific sample of every business closure in Britain. It is a selection of major national retail and restaurant failures and restructurings, so we shouldn’t pretend it proves more than it does.
But the pattern is difficult to miss. Private equity is massively overrepresented. And once we broaden the question from private equity ownership to financialisation, the pattern becomes stronger still.
Toys R Us
Toys R Us is perhaps an even cleaner example than Debenhams. In 2005 KKR, Bain Capital and Vornado bought the global business in a leveraged buyout worth about $6.6 billion. Toys R Us subsequently carried billions of dollars of debt.
Again, the standard explanation for its failure isn’t wrong.
Children increasingly wanted electronic entertainment rather than traditional toys. Amazon became an enormous competitor. Supermarkets sold toys. The company’s stores were huge and expensive. But Toys R Us was simultaneously having to service the financing structure created by its acquisition.
That’s the important distinction. A changing market tells us why a business gets into trouble. Its balance sheet helps determine whether it can get out again.
The restaurant boom
The same process became particularly obvious in casual dining. For a while Britain apparently decided that every town required several branches of every conceivable chain restaurant.
Prezzo expanded.
Byron expanded.
Gaucho expanded.
Cau expanded.
PizzaExpress expanded.
Bella Italia expanded.
Café Rouge expanded.
Las Iguanas expanded.
Private-equity money helped fuel that expansion. It looked wonderful while sales were growing. Then they weren’t.The UK ended up with too many similar restaurants, frequently occupying expensive sites on long leases.
Food costs increased.
Wages increased.
Consumer spending weakened.
Tastes changed.
And the debt remained.
PizzaExpress provides an extraordinary example.
By 2019 the business had around £1.1 billion of debt. About £500 million was a loan from its owner, Chinese private-equity firm Hony Capital, with roughly another £600 million owed to outside creditors. Its annual interest bill was around £91 million.
£1.1 billion ÷ 477 restaurants = about £2.31 million of debt per restaurant.
The pizzas weren’t necessarily unprofitable. The restaurants weren’t necessarily unprofitable. The company lost money because the operating business had to support the financial structure sitting above it. That is financialisation in a nutshell.
Don’t blame everything on private equity
There are some important counterexamples.
Wilko was family controlled. When it collapsed in 2023 it had around 400 stores and 12,500 employees. Its administrators identified declining footfall, the shift towards online and out-of-town shopping, Covid disruption, inflation, expensive high-street locations and declining stock availability among its problems. (PwC)
Private equity didn’t kill Wilko. Jamie Oliver’s restaurant empire wasn’t a private-equity creation either.
And then there is BHS.
BHS is interesting because it demonstrates that you don’t actually have to be a private-equity company to behave like one. Sir Philip Green bought BHS in 2000. According to the subsequent parliamentary investigation, BHS Ltd paid £414 million in dividends between 2002 and 2004, despite making only £208 million of after-tax profits over that period. Its parent company paid £423 million in dividends.
The business was eventually sold for £1.
The big divide isn’t: private equity = bad; traditional ownership = good
That clearly isn’t true. Private-equity investors sometimes rescue companies. Family owners sometimes destroy them. Public companies make stupid acquisitions. Entrepreneurs extract ridiculous dividends. Banks lend businesses money they cannot possibly repay.
The more interesting question is whether the ownership structure is productive or extractive.
Does the owner make money because the underlying business becomes better? Or does the owner make money by extracting value from the business? Those are very different things.
And that distinction brings us rather neatly back to the high street today.
WHSmith and TGJones
WHSmith is an interesting contemporary example precisely because we don’t yet know how the story ends. In 2025 WHSmith sold its UK high-street business to Modella Capital for an enterprise value of £76 million. Crucially, WHSmith itself described the business being sold as profitable and cash generative: roughly 480 stores, £400 million-plus turnover and around 5,000 employees. (WHSmith)
Back when I was doing my MBA a popular exam question was “WH Smiths: Why?”. Even back then the business model for their high street storeswas odd, they had expensive locations with high rents, sold lots of products which you could buy elsewhere more cheaply.
The airport, railway-station and hospital businesses remained with WHSmith. The high-street shops became TGJones. Modella said the acquisition demonstrated its belief in the future of the high street.
A year later TGJones is restructuring and as many as 150 of roughly 450 shops are expected to close. On 5 August 2026 the High Court approved its restructuring, although the judge described the plan as risky and questioned whether it amounted to an “adventurous equity play”.
None of that proves that private equity has destroyed WHSmith’s old high-street business. Indeed, Modella is putting additional money into the company and argues that restructuring is necessary to save the remainder. It may be right.
But it does illustrate the central question rather beautifully. A profitable, cash-generative high-street business was separated from a successful listed group, bought by a private-equity investor and, within roughly a year, was seeking substantial rent reductions, debt write-offs and the closure of up to a third of its stores.
Meanwhile the travel business that WHSmith kept continues.
Perhaps those 150 shops really are economically doomed. But before blaming their closure entirely on wages, National Insurance, Amazon or Rachel Reeves, it seems reasonable to ask what happened between the customer handing over their money and the shop declaring itself unviable.
So who killed the high street?
There isn’t one murderer.
Amazon did some of it. Supermarkets did some. Retail parks did some. Landlords did some, particularly one based a long way from the town centres they controlled.
Covid did quite a lot.
Consumers did plenty ourselves. Bad management deserves a substantial share.And yes, governments increasing taxes and employment costs make marginal shops and restaurants more difficult to operate.
But there is another suspect who receives rather less attention. Over several decades we increasingly treated shops and restaurants not simply as businesses selling things to customers but as financial assets capable of supporting debt, property transactions and investor returns. That worked rather well when sales were rising and money was cheap.
When conditions deteriorated, the underlying businesses discovered that they were carrying obligations accumulated during the good years.
Private equity didn’t create the internet. It didn’t make us buy things from Amazon. It didn’t cause Covid or inflation. And it didn’t make people decide that perhaps Britain already had enough branches of Byron.
But in a surprising number of the great high-street collapses, private equity or some other form of financial engineering had already made the business considerably more fragile before the crisis arrived. Which leaves us with a rather different explanation for Britain’s disappearing high street.
We didn’t just stop shopping there.
We killed it with debt.
