A deal by the owner of HMV to buy struggling retailer, Wilko, has fallen through, which is set to result in the closure of 400 of its stores in the UK.

The GMB union announced today that the stores will be closed by early October, with redundancies now looking more likely for the 12,500 staff members.

After struggling due to competition from retail chains such as B&M, Poundland and Home Bargains, Wilko entered administration in early August.

The owner of HMV, Doug Putman, opened discussions with the administrators in an attempt to save 300 of its stores. However, due to rising costs which complicated the deal, the bid has failed to go through.

Despite recording an annual turnover of £1.2bn, Wilko witnessed sharp losses and a cash shortage, leading it to borrow £40m from restricting specialist, Hilco. In order to save funds, the firm cut jobs, changed its leadership team and sold a distribution centre.

B&M purchased 51 of Wilko’s stores earlier this month for £13.1m, with the BBC reporting that Poundland is also interested in buying up to 70 stores to boost its own portfolio.

Although the purchasing deal has fallen through, there is potential that the company could survive as a range on another retailer’s shelves.

Head of money and markets at Hargreaves Lansdown, Susannah Streeter, said: “The ditched deal could not come at a worse time for the high street, with its fortunes looking increasingly crushed amid the cost of living crisis and competition from online.

“Wilko’s demise comes amid heightened warnings about the long-term decline of town and city centres, with shoplifting on the increase and boarded up outlets now commonplace. Dame Sharon White, the chair of John Lewis is the latest to warn about the increase in anti-social behaviour and has called for a Royal Commission to look at ways of solving the problems.

“It's clear there needs to be a big rethink about how to revitalise our high streets, which were once the beating hearts of communities. It’s set to be increasingly tough going as lockdown savings are further whittled away and the impact of higher rates on borrowing costs are felt more widely. It’s an increasingly competitive on the value retail landscape, as the big grocers compete with discount chains for business. In this climate a good location, the right product mix and a razor sharp focus on shoppers’ desires will be all-important, which are all factors Wilko appeared to lose sight of, prompting its demise.”

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