City Link owners deny incompetence in handling insolvency

http://www.theguardian.com/politics/2014/dec/29/city-link-better-capital-rmt-insolvency-vince-cable

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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, were very sorry about its collapse and the fallout 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 had “paid a fortune” in taxes since it was taken over by Better Capital in April 2013. More than 2,000 City Link staff are facing redundancy on New Year’s Eve and company administrators EY have been unable to reach a deal with trade union bosses desperate to save the jobs.

The RMT union has urged the business secretary, Vince Cable, to rescue the company but Moulton said the Department for Business, Innovation and Skills 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 Moulton denied the company’s collapse had been botched. Asked on BBC Radio 4’s Today programme whether it had been mishandled, he 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 public money, 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.”

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. “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 about £100m to save the company, making it virtually impossible.

The Trades Union Congress has called on the business secretary to meet union representatives. The TUC’s 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 fasttrack 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 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.

The RMT general secretary, Mick Cash, has written to Cable and EY demanding a summit between the administrators, the union and the government to explore options to save the company. Cash said the business secretary had offered to meet union bosses in the new year but the union leader stressed it would be too late to stop the “cavalier and callous” New Year’s Eve redundancies. He also criticised Moulton, who is a former Tory party donor, and his treatment of City Link’s workers.

Cash said: “It says everything about the state of industry in Britain today that a donor to the party of government can wreck the lives of thousands of people, walk away and leave the taxpayer to pick up the redundancy costs. Wave after wave of attacks on workers’ rights have created a climate of fear in workplaces across the land, with City Link a sickening example of the ability of wealthy speculators to treat their workers like dirt.”