City Link collapse ‘not mishandled’

City Link at the Broadland Business Park, where there is a risk of job losses. Picture: DENISE BRADL

City Link at the Broadland Business Park, where there is a risk of job losses. Picture: DENISE BRADLEY - Credit: Copyright: Archant 2014

The founder of City Link's parent company has denied the firm's collapse was mishandled and apologised to more than 2,000 workers who found out on Christmas Day that they would lose their jobs.

Jon Moulton said the directors of Better Capital, which owns the parcel delivery firm, are 'very sorry' about its collapse and the 'horrible effects' for its workforce.

The veteran venture capitalist claimed that taxpayers would not foot 'much of a bill' for redundancy payments for the firm's staff as City Link has 'paid a fortune' in taxes since Better Capital took it over in April 2013.

More than 2,000 City Link staff are facing redundancy on New Year's Eve and company administrators Ernst and Young (EY) have been unable to reach a deal with furious union bosses desperate to save the jobs.

The fallout will see 40 workers lose their jobs in Norwich, with Norfolk customers expected to descend on its Broadland Business Park depot today to pick up parcels.

The RMT union has urged Business Secretary Vince Cable to rescue the company but Mr Moulton said the minister's Business, Innovation and Skills Department was aware of City Link's collapse before Christmas and did not request a meeting.

The RMT has accused City Link's bosses of a 'horrific catalogue of mismanagement' but Mr Moulton denied the company's collapse had been botched.

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Asked on BBC Radio 4's Today programme whether it had been mishandled, Mr Moulton said: 'Not particularly, no.

'First of all I must say on behalf of Better Capital and its board of directors that we are very sorry about the failure of City Link and we're very sorry about the horrible effects that follow for the workforce and contractors.

'I'm afraid that is the result of the company failing, nothing more and nothing less, the company was not viable.'

Responding to reports that redundancy packages for City Link staff could be funded with taxpayers' money, Mr Moulton said: 'I don't think that the taxpayer is going to end up funding much of a bill at all on this.

'The taxpayer has certainly made an enormous amount of money out of private equity companies and their trading and success.

'Even in this one, the company would probably have ceased trading some 18 months ago, no jobs, no work for contractors and suppliers.

'In the intervening 18 months it will have paid a fortune into the government in pay as you earn, value added tax (VAT), and the like.'

Mr Moulton said it had proved impossible to save City Link and stressed that the company's directors would have been guilty of a criminal offence had they not filed for insolvency when it became clear 'a couple of days before Christmas' that the firm would collapse.

He said the Government was advised of City Link's collapse but did not request a meeting.

Mr Moulton told the programme: 'We advised BIS (Department for Business, Innovation and Skills) of the possibility of the failure of City Link some days before it went down and we have had no request for a meeting.'

The Better Capital founder also revealed that he had lost 'a couple of million pounds' on City Link and warned that it would take around £100 million to save the company, making it 'virtually impossible'.

The TUC has called on Mr Cable to meet union representatives.

Its general secretary, Frances O'Grady, said there was nothing inevitable about the company going bust and accused its bosses of using insolvency as a means to 'take the money and run'.

She said: 'The fast-track sackings at City Link are a prime example of the unacceptable face of casualised Britain, with workers denied even basic rights to proper consultation.

'But there is nothing inevitable about this company going bust. Too many employers are using insolvency to take the money and run, leaving the taxpayer to foot the redundancy bill.

'The Government must get a grip and reverse the changes in the law they introduced to make sacking workers in Britain so cheap and easy. Vince Cable should urgently meet with the union and administrators to explore alternatives before it's too late.'

City Link announced on Christmas Day that it was going into administration after years of 'substantial losses'.

Officials have met in Leeds to discuss the fate of the firm's 2,727 staff, and union bosses have vowed to stay in talks for as long as it takes to salvage jobs.

Investment firm Better Capital, led by Mr Moulton, bought the courier group for just £1 in April last year from the previous owner, pest control firm Rentokil.

A number of staff will be retained to help return parcels to customers and help with winding down the company, EY said.