The Body Shop administrators investigate claims of missing millions

Administrators of The Body Shop are investigating claims that millions of pounds were taken out of the business before its collapse, The Telegraph can reveal.

FRP, which took over the British arm last month after it fell into administration, is currently examining claims of unaccounted for funds predating the business’s sale to private equity group Aurelius. The investigation remains at an early stage.

Senior MPs are now calling for a deeper review of The Body Shop’s failure amid swathes of job losses and store closures.

Scrutiny about the circumstances of the business’s collapse will be heightened by figures seen by The Telegraph showing the company’s UK retail arm posted profits of £19m on revenues of £163m in the run-up to its collapse.

Those figures account for The Body Shop’s 198 sites across the UK in 2023 but do not cover costs from the company’s global operations.

According to the administrators, The Body Shop entity placed into administration last month included costs from the firm’s operations abroad, which led to it posting a £60m loss overall in 2022.

However, the financial health of the day-to-day operations is likely to prompt further questions as to the circumstances surrounding the company’s administration.

A separate row between The Body Shop’s former owners, Brazilian cosmetics giant Natura, and buyer Aurelius has also broken out over payments promised to around 30 former employees.

Natura said it was “surprised and concerned” by claims that Aurelius has failed to make awards worth £3m, which were promised as part of the £207m sale agreement reached in November.

An email sent by Natura last week and seen by The Telegraph said: “This is particularly concerning when Aurelius expressly agreed that The Body Shop would make these payments through its payroll, and Natura funded the cost through an agreed reduction in the purchase price of the business.

“While we continue to pursue the matter with Aurelius, we have decided to make all cash value payments owed to The Body Shop employees (and former employees).”

A source close to Aurelius said the payments were related to high-ranking employees and are to be treated like any other financial obligation by the administrator.

Aurelius put The Body Shop’s UK operations into administration just three months after striking the £207m deal.

It is understood that after completing the acquisition in January, Aurelius discovered that The Body Shop’s finances were allegedly in a worse state than expected, which sparked internal discussions over the firm’s due diligence.

Aurelius emerged as the retailer’s top creditor before its insolvency and is understood to be in pole position to reclaim The Body Shop’s assets, shorn of debt, if no bidder materialises. It will not be responsible for redundancy payments.

Wide-ranging concerns over the acquisition have fuelled political scrutiny, particularly as the taxpayer prepares to foot a multimillion-pound bill to cover redundancy costs.

Labour’s Liam Byrne MP, chair of the business and trade committee, said it has “all the hallmarks of the worst of capitalism”.

He said: “The Body Shop was a trailblazer for ethical enterprise and it now looks like it’s being crashed while the taxpayer picks up a big bill for redundancy payments.

“This is at the heart of a live research programme at the committee, which has already shone a spotlight on firms like Wilko and Asda. Something doesn’t sound healthy in these business models and we’re determined to get to the bottom of it.”

These comments were echoed by Dame Angela Eagle MP, a Labour member of the Treasury select committee, who urged colleagues to launch an inquiry.

FRP said last week that 75 The Body Shop stores would be closed across the UK in the next six weeks with the loss of 489 jobs.

Administrators said the decision was part of an attempt to “right-size” the company’s store portfolio.

It said it was “fully focused on exploring all options to take the business forward”.

Aurelius, FRP and Natura were all contacted for comment.