Fopp, one the country’s biggest music store groups with about 80 shops and 800 staff, yesterday called in receivers after a last-ditch bailout by Sir Richard Branson’s Virgin Megastores failed to win support from its suppliers.

All the stores were closed and staff were sent home, their monthly salaries unpaid. The Times has learnt that rival Virgin Megastores, controlled by Sir Richard’s Virgin Group, had attempted to merge with Fopp, injecting a big rescue loan and taking a 10 per cent stake in a new entity.

In a deal negotiated by Virgin’s Simon Douglas, Virgin would have kept the Fopp brand. A source said: “In the end the numbers just didn’t add up and suppliers to Fopp would not support it.”

Like Fopp, sales at Virgin Megastores have been hit by fierce price competition from supermarket giants such as Tesco and digital music down-load sites.

It is understood that Virgin Megastores also had a discussion with HMV about a tie-up but it could not agree terms. HMV refused to comment.

Tom Burton and Colin Dempster from Ernst & Young have been appointed joint receivers.

Yesterday Fopp, which was founded by Gordon Montgomery from a single stall in Glasgow 25 years ago, said in a statement: “It is with great regret that we announce the closure of Fopp. Our store chain is profitable, well-regarded and loved by our loyal customers and staff. However, we have failed to gain the necessary support from major stakeholders, suppliers and their credit insurers to generate sufficient working capital to run our expanding business.”

Other sources questioned whether the chain was profitable and it is thought that it may have overreached itself with the acquisition of 68 Music Zone stores from the administrator in February.

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