Industry feels impact of City Link collapse

The closure of parcel carrier City Link, the former Rentokil Initial subsidiary which had been sold for £1 to Better Capital in April 2013, has left about 1,000 self-employed van drivers and hauliers badly out of pocket.

Many were working very long hours to shift the December peak in parcel traffic, but are unlikely to ever be paid more than a small fraction of what they are owed.

Ernst & Young, which began working with City Link in late November, was informed on December 22 that further support for City Link would not be forthcoming from Better Capital, and to prepare to take over as administrators.

They were appointed after close of business on 24 December, and many staff and sub-contractors learned of this on Christmas Day.

The administrators have told Transport Operator that the decision was driven by the increasing spread of rumours about the company and that the move was: “necessary to prevent creditor action causing a loss of company assets, which can be prevented from the protection administration provides to a company.”

The administrators said they continued to let the company trade until close of business on Christmas Eve because: “It was the time when there were the lowest levels of parcels in the system, which would result in the least disruption to customers and the general public, and would also minimise the level of claims against the company for non-delivery.”

Ernst & Young highlight a long-standing lack of profitability at the company. A spokesman told Transport Operator: “City Link Limited has incurred substantial losses over several years. These losses reflect a combination of intense competition in the sector, changing customer and parcel recipient preferences, and difficulties for the company in reducing its cost base.

“The strain of these losses became too great and all but used up Better Capital’s £40m investment, which was made in 2013 and intended to help to turn around the company. Despite the best efforts to save City Link Limited, including marketing the company for sale, it could not continue to operate as a going concern and administrators were appointed.”

Sale of City Link assets was well underway as Transport Operator closed for press. The company’s much vaunted £2 million new scanner system, associated intellectual property and some parcel cages have been sold to business-to-business and secure business-to-consumer specialist DX for around £1.1million.

Petar Cvetkovic, chief executive officer at DX and an industry veteran who was himself once MD at City Link, said: “It is very sad that City Link has been unable to continue as a going concern, particularly for its employees and contractors. We are also doing all we can to provide opportunities for former City Link employees and contractors, and to offer solutions to customers who may need a new carrier.”