Major UK supermarket chain Southern Co-op has issued a stark warning that it is facing potential collapse into administration unless a merger with the national Co-op Group proceeds.
The chain stated that three consecutive years of financial losses have pushed it to the edge of insolvency.
The regional retailer runs over 300 outlets including supermarkets, funeral homes and coffee shops throughout southern England - all of which face potential closure unless a merger with the national Co-op Group proceeds.
The company expects operating losses to top £20 million in the coming financial year.
Attempts to slash costs – including a recruitment freeze and downsizing office space – have failed to halt the decline.The organisation's chair and chief executive have penned a letter to members explaining that the proposed merger represents their best chance of survival.
In a letter addressed to members, chair and CEO of Southern Co-op, Janet Paraskeva and Ben Stimson, stated, "Southern Co-op has made losses for the past three years," the statement reads. "Over the last year, trading has become more difficult, and we have relied on ongoing support from our banks and suppliers to continue operating.
That support cannot now be increased within the time available. To continue trading without a merger, we would need a significant level of financial support, and we have not received any offers of funding at that level."
Earlier this month, the Boards of Southern Co-op and Co-op Group have announced proposals to join forces, creating a society with greater scale, resilience and impact for members, customers, colleagues and communities across the UK.
The proposal, which is approved by both Boards, is subject to approval by Southern Co-op members and regulatory clearance.
Coming together should create a Group with:
- Combined sales of circa £11.5bn
- Over 7.5 million members
- Over 2,500 food stores, 800 funeral homes, six crematoria and natural burial grounds, and a significant funeral planning, legal and insurance business.
“If the merger does not go ahead, the most likely outcome is that Southern Co-op will enter insolvency through administration. This would put jobs at risk, lead to the loss of stores and negatively impact our suppliers.”
According to Southern Co-op, the decision to merge is one that would “protect more jobs, more services, and more value for members than any other option available to us today," Southern Co-op bosses added.