MPs’ report into City Link failure sparks criticism

A joint report by the House of Commons Scottish affairs and business select committees, which declared that failed parcel company City Link deceived employees and contactors about the state of the company, has been criticised by John Moulton, whose venture capital company, Better Capital, owned the parcel operator.

Published just before parliament dissolved for the general election, the report said that City Link and Better Capital were: “Morally, if not legally, responsible for the difficulties that many… individuals and small businesses now find themselves in.”

“We are dismayed that, although it was clear for some time there were serious questions over the ability of City Link to continue trading after December 2014, small businesses and self-employed drivers working for City Link were encouraged to take on additional costs despite a strong possibility that they would not receive payment for a significant part of their work in December,” said the report.

“The additional work undertaken by these people has left some of them in serious financial difficulties, with some small firms forced into administration themselves or relying on goodwill from their own creditors to struggle on. Again, there is no doubt that contractors were deliberately deceived as to the true state of the business.”

From 22 December, the MPs concluded, City Link: “took a deliberate decision not to inform employees and contractors as to the true intentions and position of the company, and this was done for the financial benefit of City Link and Better Capital.

“This amounts to a deliberate deception by omission.”

John Moulton and Better Capital responded to the report in a letter to MPs, complaining that there was no mechanism by which they could make a formal response – and saying that the allegation that there had been “deception by omission” was “hurtful and unjust”.

In a statement issued on 23 March, Better Capital said: “It is incorrect to suggest that there was any financial benefit to City Link in continuing to trade between 22 and 24 December, the date when it ceased trading. The company had effectively failed on either date.

“It is our firm belief that the company took the right decision to trade until 24 December.

“If the company had ceased trading on 22 December, which no doubt it would have done if its situation had become public knowledge, then some hundreds of thousands of parcels would have been in the system and a substantial proportion of these held by contractors.

“It is clear that in this scenario a large number of these parcels would never have been delivered, resulting in customers’ unnecessary financial loss and very substantial disappointment for families at Christmas.”

Better Capital had previously described its decision to continue trading City Link up to Christmas Eve as “brave”.

Investigations into the conduct of directors during the last days of City Link are being continued by administrators EY.