A final attempt this week to find a buyer for UK parcel delivery firm City Link has failed after “continued substantial losses” drove the company into administration on 24 December and its
operations were suspended.Hopes of a last-minute solution to save the company were dashed on 31 December when theadministrators of the collapsed company announced more than 2,300 job losses with immediate effectfrom the workforce of 2,700. Around 370 City Link staff have been kept on to help run down thebusiness and deal with the parcels that remain at the company’s depots, administrators Ernst &Young (EY) said.
Speculation about a potential rescue deal emerged earlier this week, but EY said thepotential buyer had significantly undervalued the company’s assets and had declined to amend theiroriginal offer to meet proposed alternative purchase terms that it said would be “acceptable andcommon in these situations”.
The spectacular collapse of City Link on Christmas Eve has been loudly criticised by unionswho claimed that it was the result of “a truly horrific catalogue of mismanagement” and “theactions of greedy speculators”.
Mick Cash, General Secretary of the RMT union, said: “The confirmation from theadministrators that they have just sacked 2400 staff and are pulling the plug on any efforts tosave City Link is a disgraceful and cynical betrayal that will wreck the lives of our members, manyof whom are owed thousands of pounds.” The RMT union held a major protest outside the company’smain hub in Coventry on December 31.
The Coventry-based company was founded in 1969 but had suffered several years of losses sincean over-ambitious acquisition of rival Target Express in 2006 for £210 million. The deal wasdesigned to create a leader in the premium overnight parcels market, but the attempted quickintegration of the two companies’ networks generated massive operating problems that led customersto switch business to rivals and the company slumped into the red.
There was a succession of management changes as City Link tried to fix the network problemsand restore customer confidence while also reducing operating costs, including through jobreductions. But after five years of losses resulting from the failed takeover integration, ownerRentokil Initial sold City Link in April 2013 to private equity firm Better Capital for a nominal£1.
EY said the £40 million that Better Capital had put into City Link had been insufficient toturn the company around. Joint administrator Hunter Kelly commented: “City Link Limited hasincurred substantial losses over several years. These losses reflect a combination of intensecompetition in the sector, changing customer and parcel recipient preferences, and difficulties forthe company in reducing its cost base.
“The strain of these losses became too great and all but used up Better Capital’s £40minvestment, which was made in 2013 and intended to help to turn around the company. Despite thebest efforts to save City Link Limited, including marketing the company for sale, it could notcontinue to operate as a going concern and administrators were appointed.”
City Link delivered around 60 million parcels a year – predominantly in the B2B market,despite recent efforts to move into B2C. Parcel industry sources estimate that the UK B2B marketequates to about 1 billion parcels per year, including click and collect, with the B2C market in UKamounting to a further 750 million parcels – plus approximately 160 million cross-border items.
City Link operated via four hubs, including the company’s head office and main transport hubin Coventry and three other hubs in West Drayton (Heathrow), Peterborough and Warrington, alongwith 53 depots throughout the UK.
