Debenhams stores are set to close after the failure of last-ditch efforts to rescue the ailing store chain.

It means all 12,000 employees are likely to lose their jobs when the chain’s 124 shops cease trading.

The news came just hours after Topshop owner Arcadia fell into administration, putting 13,000 jobs at risk.

Debenhams itself had been in administration since April. Hopes of a rescue were crushed after the last remaining bidder, JD Sports, withdrew.

Staff were told the news on Tuesday morning.

The department store chain had already gone into administration for a second time and is now set to enter liquidation, also known as winding-up, which means it will cease to exist as a company.

The 242-year-old retailer had already trimmed its store portfolio and cut about 6,500 jobs since May as it struggled to stay afloat.

However, the administrators said the outlook for a restructured operation was “highly uncertain” and they had therefore “regretfully concluded” that they should start winding up Debenhams UK, while continuing to seek offers for all or parts of the business.

There have been suggestions that JD Sports pulled out of bidding for Debenhams because of the collapse of Arcadia, which is the biggest concession operator in Debenhams.

However, senior sources at Arcadia dismissed any link and told the BBC it was being blamed for the collapse of a deal that had never been agreed.

What happens next?

The 12,000 jobs at Debenhams are set to go over the coming months unless the administrators do a deal for all or parts of the business.

Restructuring firm Hilco will start going into stores on Wednesday to begin clearing stock.

Tough trading during the coronavirus pandemic proved to be the final blow for both Debenhams and Arcadia, which employ more than 25,000 people between them.

Geoff Rowley of FRP Advisory, joint administrator to Debenhams and Partner at FRP, said: “All reasonable steps were taken to complete a transaction that would secure the future of Debenhams.

“However, the economic landscape is extremely challenging and, coupled with the uncertainty facing the UK retail industry, a viable deal could not be reached.”

What about the workers?

A supervisor who has worked at the Debenhams Bullring Birmingham store for five years said she had found out the news on a group call.

“The call was really sad. It genuinely felt like they had tried so hard and they had now lost the fight.

“Unfortunately the business is just outnumbered and the pandemic is something they, like all of us, could never have predicted,” she told the BBC.

Retail trade union Usdaw said it was seeking urgent meetings with Debenhams’ administrators and urged them to “treat staff with fairness and dignity”.

Usdaw general secretary Paddy Lillis said the company and its administrators had refused to engage with the union and accused them of treating staff “appallingly”.

He added that the government needed “a recovery plan to get the industry back on its feet”.

Former Debenhams chairman Sir Ian Cheshire told the BBC he felt “desperately sorry” for its employees.

He said that Debenhams had been “caught in a straitjacket” with too many High Street outlets on long leases.

Are staff pensions affected?

Long-serving members of staff, or past workers, who were members of the company’s two defined benefit pension schemes have been at risk for months of getting smaller pension payouts.

Those yet to retire, or who have retired early, could receive at least 10% less than they would have expected from their pension. If the schemes are found to be in a relatively strong financial position, they may not lose as much.

Others who have already reached pension age (thought to be about half of members) may see a smaller inflation-linked increase each year than they were promised. More recent members of staff have a different type of pension, which they keep as a pension pot for retirement.