Top shock: Kate Moss and the boss - the inside story of a fashion feud

Philip Green says his hiring of the supermodel had nothing to do with Jane Shepherdson's resignation. That's not how she sees it

As his private jet touched down in Monaco on Friday evening, Sir Philip Green might have been expected to be content at the prospect of another weekend enjoying the good life.

Outside Monte Carlo airport, a Bentley waited to ferry the head of the Arcadia retail empire to his penthouse overlooking the Mediterranean. Moored in the harbour below was Sir Philip's £35m yacht, known to his friends as the Billion Dollar Baby.

But on Friday night, Sir Philip Green was not a happy man. Just a week earlier, he admitted that profits at his Bhs chain had slumped by more than half.

And on Thursday came an even greater blow: Jane Shepherdson, the woman credited with rescuing the Topshop brand, announced that she was leaving the company after more than 20 years. It was not a happy parting of the ways.

Two weeks earlier, Sir Philip had engineered one of the biggest business coups in his phenomenal career, enlisting Kate Moss to design clothing and accessories for the chain.

The tycoon and the supermodel celebrated the deal with a fat cigar and dinner for two at a Mayfair restaurant. But The Independent on Sunday has established that Ms Shepherdson, contrary to claims from the other camp, resigned because she felt sidelined in discussions over the £3m contract.

"Jane wasn't consulted about the Kate Moss deal. It was the last straw," a former colleague revealed.

Ms Shepherdson was widely credited with transforming Topshop from a downmarket chain to a brand favoured by A-list celebrities such as Madonna, Gwyneth Paltrow and Scarlett Johansson.

Alexandra Schulman, editor of UK Vogue, said: "Jane is a visionary. She took the risk that more edgy fashion items could go to the mass market - at the right price."

That balance between low price and high fashion has enabled Topshop to grow steadily over the past decade. It has achieved sales of £600m, and is expected this year to produce profits of £100m.

"The lion's share of Philip Green's profit comes from Topshop, and most of that is due to Jane Shepherdson," said Sir Philip's biographer, Stewart Lansley. Success gave Ms Shepherdson more independence than other senior executives at Arcadia, but even she was not spared her boss's notorious temper, said Mr Lansley.

"In business terms Jane Shepherdson had the most freedom of all the brand directors. But there is no doubt they had a tricky relationship," he said.

At the group's chic headquarters in Berners Street relations between Sir Philip and his management team have reportedly deteriorated since he paid his family a £1.2bn dividend a year ago. Several senior executives have left in recent months.

For Ms Shepherdson, the final straw came with Sir Philip's decision to recruit Moss, whom he sees as the perfect figurehead for his plans to break into the American market.

Under the terms of the deal, Moss will reportedly choose her own working hours, devise advertising campaigns and have final approval on all designs.

Sir Philip denied that Ms Shepherdson quit over the decision to recruit Moss, but according to Mr Lansley she may have felt she had little choice. "Philip Green gave Kate Moss a major contract to design clothes - but that's Jane Shepherdson's job. He chose to bypass her on a major decision, which was a fairly reckless strategy if he wanted her to stay," he said.

Arcadia's annual results are expected in the next two weeks. Despite tough conditions on the high street, the group, which includes Topman, Miss Selfridge, Evans and Wallis, is expected to report a strong performance, and suggestions that Sir Philip has lost his Midas touch may yet prove premature.

Ms Shepherdson will continue to work at Topshop until December - but once she leaves the chain she is unlikely to be out of work for long. Sir Philip must be all too aware that wherever she goes next, she has the potential to become a formidable rival.