City Link collapse: Owner recoups £20m as taxpayers foot bill for redundancies
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Version 0 of 1. The private equity firm behind City Link expects to recoup about £20m from the collapse of the parcel delivery giant – as taxpayers are left to foot the bill for nearly 3,000 workers’ redundancy payments. Better Capital, the investment firm which bought City Link in April 2013, told the Stock Exchange it expected to recoup half of the £40m it had invested in the company. The announcement came shortly after it emerged that redundancy payments for 2,760 workers would be made by the Government. The fact that the taxpayer has been left to look after City Link employees has raised eyebrows, given that the fund Better Capital used to invest in the parcel firm is based in Guernsey to reduce its UK tax liabilities. News that Better Capital’s fund would recoup so much of its cash provoked fury among the workers’ representatives because it highlighted how the firm – led by Conservative donor Jon Moulton – stands at the front of the queue of creditors, even ahead of the 1,000 drivers who were put on self-employed contracts after the takeover. An RMT union spokesman said: “Our expectation has always been that Moulton and his crew will walk away without losing any money on this deal despite having wrecked the lives of thousands of staff. Now we see that they’re going to be getting their £20m back while drivers who’ve been forced to work as subcontractors will get next to nothing.” He said many of these newly self-employed drivers were owed thousands of pounds and now stood to gain as little as 1p for every pound they are owed. One subcontractor, speaking outside the City Link depot in Fareham, Hampshire, told the Southern Daily Echo he was owed £120,000. An employee at the depot said: “We’re being made redundant. It’s going to happen. Angry would be the word. Disgusted. We have got families. We have got a little one and another on the way, a mortgage to pay.” Jon Moulton claims he will lose about £2m (Channel 4) Last night the administrators, Ernst & Young, said that “substantial” redundancies will be made on 31 December. Mr Moulton, who has a reported personal net worth of £170m, told The Independent the situation was regrettable. He said he expected Better Capital would get back its £20m because there were “a lot of receivables” – money owed by customers – left in the business. He confirmed that he would personally lose about £2m from the company’s collapse as he was a big investor in the Better Capital fund. Its offshore base in Guernsey was typical for investment funds, he said, adding that City Link had still paid millions of pounds to the taxpayer in such duties as PAYE. Asked about the self-employed drivers, he said: “These drivers agreed to go self-employed because they could make more money that way, but as a result, they lose the protections of being an employee.” The private equity tycoon also revealed that Better Capital’s big City investors had urged him to “pull the plug” on City Link in November after Mr Moulton’s firm warned them the company was doing badly. At the time Better Capital was still attempting to rescue the situation and turn the business around. “Overwhelmingly they were telling us to get it over with, quite boldly, telling us not to throw good money after bad,” he said. He refused to name names. Stock Exchange documents show the major investors include Aviva, Scottish Widows, Legal & General, Investec and Jupiter Asset Management. Meanwhile, the City Link situation took a more political turn as Mr Moulton revealed that Vince Cable’s Department for Business, Innovation and Skills had been informed of the possible collapse “some days” prior to the announcement on Christmas Eve – but that nobody from the ministry had made any request to meet the company at that point. Labour’s shadow Business Secretary, Chuka Umunna, wrote to Mr Cable demanding to know why, and if any attempt to broker a rescue deal had been made, given that taxpayers’ money was to be used to pay the redundancy bill. The department said it was now in talks with employee representatives. Shares in Royal Mail, which was controversially privatised by Mr Cable’s department last year, surged as much as 5 per cent yesterday as the markets reopened for the first time since the collapse. Royal Mail is expected to win many millions of pounds of business from the demise of its rival. The RMT’s general secretary, Mick Cash, said depots were in “absolute chaos” as they opened yesterday for members of the public to pick up the remaining undelivered parcels. He said: “Staff were hauled in to pre-dawn meetings with the administrators with the vast majority told their jobs had been destroyed on the spot.” |