At Philip Green's offices they haven't got used to his recent knighthood. "If you go to the sixth floor, Sir Green will see you there," says the security guard.

Green has two head offices, one for each of his companies: Bhs, in Marylebone Road, and one, for Arcadia, in Berners Street. We're meeting in the latter, home to the Topshop, Topman, Burton, Wallis, Dorothy Perkins, DH Evans and Miss Selfridge high street fashion chains.

The entrance is low-key - no moody portraits of models - the lifts are cramped. Green is worth £4.9 billion, yet there are no lavish touches, no hint of ostentation. The furniture is black, comfortable but functional.

There are black-and-white portraits of his wife, Tina, and teenage children Chloe and Brandon, a model of a Gulfstream jet, a large TV, some board games that look as through they've been borrowed from a store with the intention of being played one day, a Jo Malone scented candle, and that's it. There is no computer, not even a laptop.

This should be a period of triumph for Green. He dominates the high street, he's made billions, he's a knight, and next week, his brainchild, the country's first Retail Academy, to groom future retailers, will open. And, he's just pulled off the world coup of hiring Kate Moss to design her own collection for Topshop.

Yet when we meet, there's tension in the air. He's had two blows in quick succession - no sooner did he sign Moss than his longtime brand chief, Jane Shepherdson, quit; and Bhs profits have fallen 60 per cent - both of which, he knows, have prompted critics and rivals to ask whether his Midas touch is deserting him.

On Shepherdson, there's no hiding his annoyance and disappointment at her resignation: "It's done, she's going. It's over. Move on." He seems convinced Shepherdson isn't leaving to join a rival - she wanted a change, it's a personal thing, he says.

Certainly, if he suspected she was defecting, then he wouldn't be so friendly towards her and she wouldn't still be on the premises. "She's downstairs now, there's no problem between me and her."

He claims it's no big deal. "People come, people go," he says, flicking his hand. "Would it have got as much coverage if we hadn't signed Kate Moss? No. Would it have been worrying? Yes - it's always concerning when long-serving people in the business leave.

"Look," he says, "Jane was the leader and face of the Topshop brand. But Topman is actually our best-performing brand - has been for a while - and I don't hear about Dave Shepherd [its brand director], it's all Topshop and Jane."

As for Moss, she is "the best signing on the planet". What of the criticism that one of the reported probable items will be a £200 bag - far more expensive than your normal Topshop item? His lip curls. "You know that Louis Vuitton shoulder bag she's modelling now? How much do you think that costs? I'll tell you - E2,500 (£1,775). And do you know how long the waiting list is? Six months. Leave it out. I wish people would give us our due - we would not have signed Kate Moss if we didn't have a team who knew what to do with her brand."

After the Bhs fall, all eyes are on Arcadia's results this week. Green won't go into specifics but says they will be "all right, they're OK".

Last year, at this time, he produced a sensational £1.2 billion payout for himself and his family. Will there be another eyepopping boost to the Green bank balance? He suggests not. "You don't need to do a dividend every year."

He is wearing his trademark open-necked white shirt and smoking his favourite Philip Morris cigarettes. He's lost weight, I say. "Sixteen pounds," he says. How? "In four weeks, one meal a day." It must be the tennis, too? "Nah, I've not had much time for it. I walk a lot." (It's true, he often leaves Arcadia for a wander along Oxford Street, looking in windows, walking into his shops and his rivals', up and down, round all the floors, watching what people are buying, checking what everyone's doing.)

He is not swearing as much as I remember. Has the honour changed him? He nods. "You can't be unaware of it - you must act sensibly." The knighthood is significant. It's a symbol that even though he's fiercely anti-Establishment - unclubbable, hating the old boys' network, suspicious of anyone who isn't out there actually getting their hands dirty and doing the business - the Establishment is more forgiving.

He's an A-list guest at charity dinners, where he's generous with his giving, and he's got senior ministers lining up to congratulate him on the Retail Academy. In the City, too, while the older, stuffier elements aren't so keen to join forces with him, mindful of an unpredictable and not always successful past, others are less hidebound and queue up to be in his camp.

He's also raised his ambitions. His talk these days is of global expansion, of taking Topshop to America - although the process of finding a suitable local partner is taking longer than he thought - and of passing the empire on to his children, of creating a dynasty.

"Direct family can't just be good - because for them, good isn't good enough. They've got to be exceptional because they've got a handicap - they've got to work harder to earn people's respect.

"They've got to be passionate and interested, committed and prepared to make sacrifices, understand different aspects of society and be knowledgeable, then we'll see. At the moment, my daughter, who is 16 in March, has a fabulous eye for the product and my son, who is 15 in April, is more analytical and likes the numbers, but it's too early."

His children, he says, "will need at least 10 years immersed in the business if they contemplate taking over. So, from their mid-twenties, if they're committed-they will have to give 10 years. If they're going to do it, they know the tag."

As for his own retirement, despite having achieved everything there is for a retailer to achieve (and some), he has no plans. "If I wake up one day and I say this is not for me, then that's the end of the movie." But, he stresses, right now "I'm trying harder than I've ever tried in my life."

He is referring to Bhs and his determination to turn it round. The flagship Oxford Street shop has been entirely refurbished in only four weeks, and he's signed Gordon Ramsay and Kelly Hoppen to launch their cookery and homeware collections.

Later, when I leave, he gets his bodyguard, Shaun, to guide me round the new-look store - "so you don't get up to mischief, Mr Blackhurst". It's impressive: airier and lighter than before, and the Ramsay/Hoppen ranges are a vast improvement.

Green always puts in long hours but Bhs has sent him into overdrive. He works in London during the week, flying back home to Monaco on Fridays. "I do no business at weekends. I maybe get three, four or five calls specifically about business and that's it."

But Monday to Friday, he says, "I've never worked harder. Today, I started at 6.30am and will finish at 10pm. Yesterday, I spent all day going through three departments of products."

One night last week, he went out for dinner with his pal, Simon Cowell. At 11.40pm, he went with the X-Factor star to Bhs. He wanted to show Cowell the revamp, but there was also a more serious point to the visit. The shop was days away from unveiling its redesign. "I wanted to make sure everything-was ready, that the price points were right."

Something else was gnawing away at him. Earlier in the day, a Bhs executive had told him he couldn't understand why a particular gift wasn't selling - they'd ordered 200,000 for Christmas and it wasn't shifting. "I thought: 'That's not possible.' So when I went back in at 11.40, I went to find it. There was a sticker on it, saying 'buy one get one free'. I rang him at 12.15 that night and said: 'Call me.' When he called at 7.15 in the morning, I said: 'Here's a clue - buy one get one free.'"

Green raises his voice: "It's a present. Nobody wants a present that's free - and nobody wants to give a present they didn't buy. You do 'buy one get one frees' on tubes of toothpaste, not gifts. I said to him, 'Take the sticker off and sales will go up 45 per cent.' He did, and they already have."

Green is a billionaire, and yet he's checking on his shops in the middle of the night, phoning his staff, worrying about the price of a product that even if he sells them all, will make for him what amounts to pin money. And he was back in there at eight the following morning, before meeting me. Why do it, why put himself through all this, when he's got more money than anyone could ever need? "Because I like it." He fixes me with a stare. "Why do you do what you do? You can't win the lottery unless you buy a ticket. I don't just like what I do - I love it."

But what about the cash, surely he's got enough? "It's not about the money. What's your definition of enough money?" I think, and say £10 million would do me. "OK, look over there," he says, pointing at the window, across to the City skyline, "if £10 million was enough, all those buildings would be empty. Money is not my fundamental driver, same as it's not theirs."

He knows what people are saying, knows that his rivals are relishing his recent discomfort. But he's got one question for them. "Phone them up and ask them if they'd like to swap places with Philip Green and see what they say."

There seems little point - despite his problems, all things are relative and I think I know the answer.