Buying loss-making City Link was a ‘mistake’ and the insolvent firm had had little chance ofsurviving in the highly competitive British parcels market before its collapse at the end of 2014,
former owner Jon Moulton admitted to MPs yesterday.The venture capitalist also claimed he warned the government’s business ministry on December23 about the impending collapse on Christmas Eve but wanted to announce this first on December 26as ‘the least worst thing to do’, according to diverse UK media reports on his questioning by ajoint hearing of the parliamentary committees for Business and for Scotland.
Moulton bought City Link for £1 from the Rentokil Group in 2013 and pumped £40 million intothe long-term loss-maker in an effort to restore it to profitability by reducing costs and growingthe business. But despite lower losses turnaround efforts failed amid the tough competition in theBritish parcels market.
The company went into administration on Christmas Eve and many staff learnt of the collapsefrom TV reports on Christmas Day. Some 2,350 staff out of the 2,700 workforce were made redundanton New Year’s Eve and a further 230 were laid off in early January. In addition, about 1,000delivery sub-contractors working mostly or exclusively for the firm also lost their business.
“You don’t have to be good at hindsight to see [buying City Link] was a mistake,” he said. “It had lost more than £300m for its prior owners. It was a frightening company,” the Telegraphquoted him as saying. City Link had been “too small a company in too difficult an industry,” headmitted. Moulton said the firm had been put up for sale in the last few months of 2014 but thelast potential buyer walked away in December.
Describing the days before and after the collapse on December 24, Moulton said he only knewfor certain on December 22 that the company would go into administration on Christmas Eve, andwarned the ministry about this on December 23. But he had wanted to tell staff first on Boxing Day(December 26).
“All we are talking about is a matter of timing,” he said. “Do we get people to sufferearlier or later? My preference was for staff to become aware on Boxing Day as the least worstsolution. It was horrible but as good as it got.”
He said his company had lost £20 million from the collapse but hoped to recover theremaining £20 million which had been given as a secured loan, putting it above other creditors.However, he confirmed that staff would be paid for overtime hours worked in December.
The RMT union, which represents the bulk of the former City Link workers, welcomed theparliamentary hearing. General Secretary Mick Cash said: “RMT welcomes the fact that followingpublic campaigning by this union, and political pressure from RMT’s parliamentary group, that bothBIS and the Scottish Affairs Committee are opening up investigations into the folding of City Linkon Christmas Day.
“It remains the case that nearly 3000 workers were dumped out into the cold over the festiveperiod in a shocking example of how bandit capitalism operates unfettered in this country. Thefight for justice for the City Link workforce, and for regulations to the stop this kind of callousdisregard for working people and their families, goes on.”
