City Link’s administrators have announced a further 230 redundancies at the bankrupt UK parcelcarrier, as depot operations close across its UK network over the coming week.
Administrators Ernst & Young (EY) said a total of 51 City Link depots would be permanentlyclosed by 15 January 2015, although a small number of back-office employees would be retained atsome of these sites. City Link’s depot operations at a number of locations closed yesterday,including in Bangor (Wales), the Isle of Wight (Cowes), Carlisle, Guildford, Scunthorpe, Aberdeen,Leeming, Gloucester and Lincoln.
EY said 141 people in total would be retained at City Link’s Coventry head office and transporthub, as well as across a number of other sites, to continue to assist the joint administrators inrealising the company’s assets and winding down its operations, as well as returning parcels tocustomers.
After administrators were brought in on 24 December, hopes of a last-minute solution to saveCity Link ended on 31 December when EY announced more than 2,300 job losses with immediate effectfrom the City Link workforce of 2,700. A further 1,000 self-employed contractors used by City Linkare also thought to have lost their employment. Around 370 City Link staff had been kept on to helprun down the business and deal with the parcels that remain at the company’s depots.
As the 51 depot operations close over the coming week, EY said the remaining 20,000 parcels inthe company’s network would be sent to City Link’s Coventry hub, from where they will either becollected by customers (senders) or returned to customers through an alternative parcelcarrier.
Hunter Kelly, joint administrator of City Link, commented: “It is with regret that we announcefurther redundancies at City Link Limited, which will take effect over the coming days as thecompany’s remaining UK depot operations close. Having returned a large volume of parcels to CityLink’s customers and recipients over recent days, it is no longer viable to continue operatingthese depots and a phased plan to close them has begun.”
He said all employees affected by redundancies taking effect between 7 January 2015 and 15January 2015 had been informed of the anticipated closure dates. Employees affected by redundancywould also be offered appropriate advice and support in making claims for statutory redundancypayments.
EY said all employees affected by redundancies taking effect between 7 January 2015 and 15January 2015 had been paid for December 2014 in full, and December overtime would be paid on 9January 2015. It said the precise closure dates of individual City Link depots were dependent onthe progress made over the coming days in transporting parcels to the Company’s Coventry-basedtransport hub.
Better Capital founder Jon Moulton said last week that he hoped to recoup half of his £40minvestment in the company via the administration process, and as this had reportedly beenstructured as a secured loan, Better Capital ranks among the top creditors of the failedbusiness.
Mick Cash, general secretary of City Link union RMT, said it was “simply outrageous” that CityLink’s owners, private equity firm Better Capital, had “ring fenced their investment as securedloans and will get first call on any cash raised, while our members will be forced to wait monthsand can? only expect a pittance”. He continued: “The fight for justice for the City Linkworkforce goes on and RMT continues to press for a full and forensic investigation into eventsleading to the collapse of the company.”
In a CEP-Research article last week, commentators said that City Link’s collapse was due to itsfailure to successfully find a niche in the market and adapt to changing customer expectationsrather a correction of market overcapacity, although they also highlighted that the UK parceldelivery market was highly commoditised, with a very low and highly competitive average parcelprice, particularly for e-retail deliveries.
Postal and e-commerce consultant Richard Wishart, managing director of Delivery Management, saidthe City Link business strategy was based on a fairly extreme internal franchising model that hadmade it very difficult for the company to respond sufficiently quickly to the rapidly changinge-commerce market, stressing that it was also difficult to take major costs out of a franchisemodel.
City Link delivered around 60 million parcels a year – predominantly in the B2B market, despiterecent efforts to move into B2C. Parcel industry sources estimate that the UK B2B market equates toabout 1 billion parcels per year, including click and collect, with the B2C market in UK amountingto a further 750 million parcels – plus approximately 160 million cross-border items.
Earlier this week, UK parcels, mail and logistics network operator DX Group agreed to buy someof the assets of City Link, comprising cages, scanners and certain intellectual property, for£1.125 million. It also offered to provide opportunities for former City Link employees andcontractors, along with several other firms including parcel delivery network APC Overnight
Sources said good multi-drop parcel delivery drivers were in demand throughout the UK parcelssector and that high-quality staff would not be out of work for long. The UK’s current heavy goodsvehicle (HGV) driver shortage also meant that HGV drivers would be snapped up.
City Link had been loss-making since its over-ambitious acquisition of rival Target Express in2006 for £210 million. The deal was designed to create a leader in the premium overnight parcelsmarket, but the attempted quick integration of the two companies’ networks generated massiveoperating problems that led customers to switch business to rivals and the company slumped into thered.
There was a succession of management changes as City Link tried to fix the network problems andrestore customer confidence while also reducing operating costs, including through job reductions.But after five years of losses resulting from the failed takeover integration, owner RentokilInitial sold City Link in April 2013 to private equity firm Better Capital for a nominal £1.
