Powerhouse collapse puts 500 jobs under threat

The UK's third biggest electricals chain closed its doors for the second time in three years yesterday after PowerHouse's New Zealand owner put the company into administration.

Around 500 staff turned up for work to find the group's 50 UK outlets shut and themselves out of a job. In February, the retailer shut its 27 stores in Scotland. At the time, Pacific Retail Group (PRG), the New Zealand group that bought PowerHouse from its last set of administrators, claimed the rest of the business was on track to break even by next year.

But yesterday PRG's chairman, Jock Irvine, said competition from internet-based rivals had forced it to beat a retreat from the High Street. "We believe [this] is the most responsible course of action, in the interests of all the creditors," he said.

BDO Stoy Hayward, the administrator, said it would seek to sell the company and its assets. Industry sources said it was unlikely that Currys, DSG's high street chain, or Comet, which is owned by Kesa Electricals, would be interested.

PRG, which announced its biggest shareholder had launched a bid to take it private, stopped short of promising PowerHouse's customers that they would not be left out of pocket. "It is hoped that most purchases will be honoured," the company said.

Martha Thompson, business restructuring partner at BDO, said all 50 PowerHouse outlets had been closed and 500 staff made redundant. The future of 150 employees who work in distribution and at its head office in Bicester, Oxfordshire, is uncertain.

John Hannett, general secretary of the shopworkers' union Usdaw, said: "Our members in Powerhouse have worked miracles in keeping Powerhouse afloat." An Usdaw spokesman added: "There is no way you can sweeten the pill of redundancy but to just turn up and find the doors are locked and you can't go in is a terrible situation." The last retailer to treat staff similarly was Courts, the furniture chain that went bust in December 2004.

When PRG bought PowerHouse in August 2003 it paid £16m for a loss-making group with 223 stores and 800 staff. It shut stores and cut jobs to try to turn the business around but PowerHouse, which was formed when the retail businesses of three regional electrical companies, Midlands, Southern and Eastern, were privatised, has always been a weak third player in the market.

Rising rents and increased competition recently prompted DSG to turn its Dixons high street chain into an internet-based retailer. It has rebranded the stores as Currys.digital. Ironically, PowerHouse's collapse comes as falling prices of flat-screen television has triggered a sales boom at Comet and Currys.

PRG said it received a bid for the remaining 19 per cent that Logan, its biggest shareholder, does not already own. The company said the timing of the two events was unconnected.