As Paperchase opens new Glasgow store designers speak out

When Paperchase went into administration in January last year it did so owing around £22 million to small businesses who supplied the company with greetings cards.

For designer Angela Chick it turned her dream job into a nightmare as she was left £22,000 out of pocket by the company's collapse and, to add insult to injury, Paperchase kept and continued to sell her stock.

Chick, who marks the 10th anniversary of her business this week, said: "I joke that when I was eight I raised my hand during a careers day to say I wanted to be a starving artist or an entrepreneur.

"I thought that starving artist was just what an artist was called because I had never met someone who was an artist for a job.

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"I didn't realise how hard Paperchase would work to make sure I was the former rather than the latter."

Not long after entering administration, Paperchase was bought over by the credit arm of a private equity firm, which allowed for around 760 jobs to be saved but saw the new owner shed its debts to suppliers.

Aspen, the new owner, also bought around £7m of stock and was able to continue to sell these products - despite the fact the suppliers had not been paid for these goods.

Business is now apparently booming, according to a spokesperson for the brand, but it has left many small businesses out of pocket.

Chick was one of a group of designers who appeared on the comedian Joe Lycett's Christmas special to highlight the ongoing difficulties left by Paperchase's rescue deal.

The collective, who began supporting one another once Chick took to Instagram to air her concerns, are among those urging customers to boycott Paperchase and shop directly from them instead.

For Chick, and other small businesses like her, supplying Paperchase's 125 UK-wide stores should have been a career highlight when a buyer got in touch with her in 2020.

The excitement turned to extreme stress and dismay when the company, in late 2020, stopped paying its invoices.

She said: "I was really excited because I had dreamed of this since I was at university as a student shopping in Paperchase all the time and I knew it was exactly what I wanted to do."

After an initial few orders were all paid on time, Paperchase started "ramping up" the number of orders from her in quick succession.

And then, she says, she was "ghosted" by the accounts department.

Chick added: "I felt very naive but then had to talk myself out of that because I couldn't have known.

"I had taken a break from work over Christmas but on my first day back a friend sent me a link to a story about Paperchase entering administration and that was the first I heard of it.

"It was pretty rough.

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"I got in touch with all the [Paperchase] buyers I had dealt with. None of them got back to me but obviously at this point I am in panic mode because I can't afford to lose this money."

Chick, along with other suppliers, was offered a deal of 15 per cent of what she was owed in exchange for signing a contract to say she would keep supplying Paperchase.

She turned the offer down but, to keep her business afloat, had to use all of the money she had been saving for a house deposit.

Like Chick, designer Allistair Burt, who was left £7500 out of pocket, turned down the 15% offer.

Burt, who started stocking Paperchase in 2016, said: "A few people had to accept it because they would have gone bust and they needed the money to keep them afloat.

"I said no, due to the principle of the thing.

"When it happened I felt terrible for them because it was a top team I was working with, I loved the stores and I always think the best of people so I thought that they must feel awful.

"But then [the suppliers] started piecing together a timeline of who had been told what and when and we realised it wasn't all matching up. We realised it possibly hadn't had to go down the way it did.

"It hadn't been as sad a tale as we first thought."

Burt, whose brands are Hole in my Pocket and Eat Haggis, had received a call saying that Paperchase was planning to freeze payments during lockdown and so he stopped sending them stock.

He credits this with the fact he was left with significantly less debt than other designers who were not aware of this.

Burt added: "At the same time a very small stockist of mine in London went in to administration and that lady had to get another job and she kept paying everybody back.

"Then you compare that to the actions of a multi-million pound company like Paperchase.

"At the time this happened I was trying to give my stockists as long a time to pay as possible due to the pandemic so it ended up we didn't have as big a cash flow at that time.

"This meant I couldn't keep hold of all my team so it had a significant impact."

A spokesperson for Permira Credit and Aspen Phoenix Newco, trading as Paperchase, said: "Aspen acquired the Paperchase brand in January 2021 because they believed in this much loved High Street brand.

"As such, they invested money into a business that couldn’t have continued otherwise, and saved 761 jobs in the process.

"They deeply regret that Paperchase’s former owners were unable to pay their creditors, including individual artists and small businesses, and had to hand the business over to administrators at that time, almost two years ago."

Burt says the only silver lining from the situation is that the designers are now sharing tips and information and have become a tight knit team.

Administration deals such as this are perfectly legal and can rescue and revive floundering businesses, as in Paperchase's case, but can be controversial as critics believe the system can be abused to shed debts.

Paperchase was taken over by Permira Credit, which had been a long-standing investor in the company, and a former director, Oliver Raeburn, is involved in the new company.

Legislation reforms in 2020 also mean that HM Revenue and Customs was moved up the order in which creditors are paid, leaving unsecured creditors, such as independent suppliers, further down the list.

This means that, by the time it comes to them the money has run out, a situation the Federation of Small Businesses has criticised, previously calling for government action to protect small companies.

Burt and others are still pursuing Paperchase for the money they are owed and have engaged a company to investigate the administration deal.

Chick added: "It's a very scary, lonely place when you're stuck in that situation as a small business owner.

"I was so scared speaking out about it because I thought it might have an impact on the kind of money I see.

"It's all been a pretty disgusting thing."