Southern Co-op will “most likely” go into administration if members vote against the merger with Co-op Group, resulting in store closures and jobs losses, it has warned.
CEO Ben Stimson and chair Janet Paraskeva issued the warning in a letter to members yesterday (22 April), as they were “concerned that some of the conversations being shared online [do] not reflect the full picture”.
The letter aimed to provide “a clear and open update” which laid bare the severity of its situation and the level of financial support it needed to continue trading.
“Southern Co-op has made losses for the past three years,” they said. “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.
“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.”
Potential to appoint administrators
The society also created a comparative table that highlighted each likely outcome if members voted for or against the merger.
If members voted ‘no’ or did not vote, Southern Co-op said it would be unable to continue operating independently and an external administrator would be appointed to realise values for creditors. It also said there would likely be significant job losses, possible store closures, and member influence and decision making would be lost.
If members voted in favour, on the other hand, the merger would provide “immediate financial stability”. It added that more jobs would be saved, stores would remain open, and member value would be protected within a continued co-operative structure.
The proposal for the societies to join forces was announced earlier this month. The landmark merger would create an organisation with sales of circa £11.5bn, almost 2,500 stores and over 800 funeral homes.
According to a member information pack on its website regarding the proposal, Southern Co-op had implemented a range of mitigating measures over the past few months to stabilise the business, including selling or closing retail stores that were no longer profitable, freezing recruitment at head office, reducing its office space from 17,000 sq ft to 10,000 sq ft, and holding its capital spend “at the lowest possible level”.
However, none of these options “created the runway we need to survive as we are”, it said. With sales falling, and operating losses (subject to audit) in excess of £20m in the next financial year (to January 2026) owing to “the malicious cyberattack on the Co-op Group last year”, the proposal to join forces with Co-op Group was the only viable option on the table for survival, and would allow Southern Co-op to “combine strengths, grow sustainably and broaden the range of services available to members”.
An initial vote on the proposals will be held at a special general meeting on 6 May. A second SGM will be held on 21 May and the results of the vote are expected to be announced on the same day.
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