City Link owner tells of sincere regret at failure

The private equity owner of City Link, the parcels delivery company that collapsed on Christmas Eve, told MPs the decision to close the business with the loss of nearly 3,000 jobs was made with "all the enthusiasm of a man reviewing the details of his own hanging".

Jon Moulton, the founder of City Link's parent company Better Capital, told MPs on Tuesday afternoon that he sincerely regretted the failure of the company, on which Better Capital lost £20m. The decision to close City Link was taken after its management presented a business case just before Christmas that showed the firm had lost £3m in December - its busiest month.

Coventry-based City Link appointed Ernst & Young as administrators on December 24 but employees only found out through the media on Christmas Day. More than 2,700 staff lost their jobs, prompting a political outcry over the timing of the closure.

Mr Moulton told a joint hearing of the Business and Scottish select committees that Better Capital had informed the government's business department on December 23 that it was likely to go into administration, but decided to make the formal move on December 26 "as a less evil thing to do" - a comment which prompted snorts of derision from MPs.

The RMT union was leaked the information and told its members, with the media reporting the news on Christmas Day. "We didn't want to announce it on Christmas Day," Mr Moulton said. "That was forced on us."

In an at-times heated exchange, the private equity veteran said the company looked very closely at a range of options in the last few months of 2014, including a sale or refinancing, but the business went "downhill very rapidly". "The final legs ran out when the last buyer ceased to be on the table and the last refinancing ran out. That was the 22nd of December," he said.

Better Capital had financed its £40m investment into the delivery company as a secured loan, meaning it ranked ahead of staff as a creditor. But Mr Moulton surprised MPs by saying that employees would still be paid for overtime during the pre-Christmas period, ahead of other creditors. He confirmed that Better Capital hoped to recoup £20m of that initial investment.

Asked whether the cost of redundancy payments would fall on Better Capital, Mr Moulton confirmed that the state would pick up the bill at around £4m, as revealed by the Financial Times. "If you think you're going to make things better by inflicting costs on people who do turnrounds, then you'll end up like France where they don't do it," Mr Moulton said.

Better Capital had acquired the lossmaking business from Rentokil for just £1 in 2012 but was unable to turn the company around amid stiff competition from rivals, including retailers such as Amazon which deliver their own parcels.

"At the end of the day it was too small a company in too difficult an industry," Mr Moulton said. "Prices in the market came under severe pressure and we were a weak player in a weak market where a lot of other players had trouble too."

Mr Moulton admitted he is "the big cheese" at Better Capital but insists he was not involved in the operational management of City Link. "I don't even work full-time for Better Capital," he says.

Ian Davidson, chairing the MPs, suggested that Mr Moulton was avoiding tax by basing Better Capital and himself in Guernsey. Mr Moulton retaliated: "That is an incredibly simplistic view if I may say so."

Trade unions welcomed the hearing, having lobbied the business secretary Vince Cable to consider a state-backed rescue of the company. "It remains the case that nearly 3,000 workers were dumped out into the cold over the festive period in a shocking example of how bandit capitalism operates unfettered in this country," the RMT said. "The fight for justice for the City Link workforce, and for regulations to the stop this kind of callous disregard for working people and their families, goes on."

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