Sir Philip Green’s rescue restructure of his Topshop-to-Burton retail empire is under threat from a US property group’s legal challenge.

New York-based Vornado has filed papers at the high court challenging two of the seven restructuring deals approved by Arcadia’s creditors last month. Vornado is the landlord of Topshop’s Broadway and Fifth Avenue stores, which were closed after Arcadia’s US arm went into administration last month.

Arcadia, which employs about 17,000 people and owns Dorothy Perkins, Miss Selfridge, Evans, Topman, Wallis and Outfit as well as Topshop and Burton, has seen sales and profits slide amid rising competition and costs as well as years of underinvestment by Green.

Quick guide Why are UK high street retailers in trouble? Show Hide What’s the problem? Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as unseasonable weather. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result. In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores. At the same time, there is a move away from buying "stuff" as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit, have coincided with economic and political uncertainty that has dampened consumer confidence. What help do retailers need? Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. They also want more political certainty as the potential for a no-deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs at the end of this year. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers. What is the government doing? In the December 2019 Queen's speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m "future high streets fund" under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas. What is the outlook in 2020? Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further potential Brexit wobbles to come – retailers are facing another tough year in 2020. The latest rise in the national minimum wage in April will also add to costs and hit profits. On the plus side, there are hopes of a boost to the housing market from increased certainty about Brexit after the general election. There are also signs that the shift to online shopping is slowing, potentially easing the pressure on high streets. Sarah Butler Photograph: Matthew Horwood/Getty Images Europe

The former billionaire’s retail empire staved off collapse last month after winning the backing of creditors for a rescue plan that involves the closure of 50 of its 570 stores and 1,000 job losses.

The plan involved seven company voluntary arrangements (CVAs), which are insolvency procedures that have been used to shut stores by a growing number of high-street retailers, including New Look, Debenhams and Mothercare.

Ian Grabiner, the chief executive of Arcadia Group, said: “These challenges are entirely without merit and we will vigorously defend them.

“The CVAs are a vital part of our restructuring, putting the business on a firm financial footing and enabling significant investment as part of our growth plans which will ultimately benefit all our stakeholders. Our group continues to trade as normal and we remain focussed on delivering our turnaround plans.”

Vornado was among a group of landlords that recently lost an attempt to challenge Arcadia’s restructuring plans in the New York bankruptcy court, where they argued they had been “frozen out” of the process. The US court ruled that the landlords could submit their claims in the UK.

The challenge has not delayed Arcadia’s plans to cut rent or close stores even though these actions may have to be unwound if Vornado wins in court.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

A new funding package for Arcadia’s pension fund, which is reliant on completion of the CVAs, will also be put on hold until the challenge has been resolved.

Green and Arcadia won support for its restructure from the Pensions Regulator, the group’s pension fund trustees and the Pension Protection Fund, an industry-backed lifeboat for collapsed companies’ savings schemes.

They gave their support after Green’s Monaco-based wife, Tina, who is the official owner of Arcadia, agreed to pump £100m into the scheme over three years, alongside a £285m contribution in property assets and cash payments from the company itself once the CVAs are completed.



