Jon Moulton, founder of the Better Capital investment firm that owned City Link, has hit back at accusations of callousness in allowing the parcel delivery company to go bust on Christmas Day with the loss of 2,700 jobs.
In occasionally heated exchanges with MPs on the business and Scottish affairs committees, the Tory donor said he had hoped to hold back the news until Boxing Day as the “least worst solution” and blamed the RMT union for leaking it.
Labour MP Ann McKechin said the way the administration was handled was “utterly chaotic”, telling Moulton he must have known in November that the firm might go bust.
The private equity veteran, who has amassed an estimated fortune of £225m, admitted it became clear City Link was “doomed” late in the autumn.
But he insisted he and his firm had worked flat out to keep it afloat until the last potential buyer walked away on the weekend before the collapse. “We killed ourselves to try to save this company and we failed.”
Tory MP Brian Binley questioned whether City Link was trading legally in the time before it went into administration. Moulton replied: “That is an extremely serious allegation.” Binley said he was covered by parliamentary privilege. Moulton shot back: “It is a good job you are.”
When challenged by MPs whether the Department for Business, Innovation & Skills (BIS) should have been told earlier about the impending collapse, Moulton claimed he had flagged up City Link’s insolvency as a “serious possibility” in an email to BIS on 19 December. On 23 December, BIS was told that the company was “almost certainly” going into administration the next day.
The venture capitalist confirmed his firm had lost half its £40m investment in City Link and admitted that the collapse had also harmed his personal reputation.
He insisted his plan to tell City Link’s 2,700 workforce on 26 December would have been the “less evil thing to do” as it would not ruin workers’ Christmases and prevent a “catastrophic effect” on the delivery of thousands of parcels.
Administrators at Ernst & Young were formally appointed on Christmas Eve, with most workers finding out through the media on Christmas Day.
Moulton said it was a shame that the RMT union was “very anxious to push the news out” earlier and “harassed Sky News” which in turn pressured the administrators to confirm it on 24 December.
MPs accused Moulton of cynicism by allowing City Link’s 1,000 self-employed drivers to take on extra staff and work long hours of overtime to meet the Christmas rush. He was adamant that permanent staff would get their overtime pay because arrears of wages are classed as a preferential creditor, adding that if this did not happen he would be “inclined” to give his share of the £20m recoupment to those workers. But he admitted that subcontractors did not have the same protection.
Moulton told Pamela Nash, a Labour MP on the committee, that subcontractors who lost thousands of pounds should “have found a better client” than City Link. He admitted the firms, including one that lost £36,000 after taking on extra staff, would only get a “small portion” of their money back.
While taxpayers are picking up a £4m bill for statutory redundancy payments, Moulton said the state had received £75m in PAYE and national insurance payments since 2013 when Better Capital acquired the loss-making parcel firm from Rentokil.
He hit back at suggestions that the turnaround industry was flawed, saying: “if you inflict large costs on the turnaround culture you’ll end up like France, where they don’t have it”.
RMT’s general secretary Mick Cash said ahead of the committee hearing: “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 fight for justice for the City Link workforce, and for regulations to stop this kind of callous disregard for working people and their families, goes on.”
Moulton agreed with MPs that with the benefit of hindsight, Better Capital’s acquisition of City Link had been “a mistake”. He wanted to buy the business from Rentokil because it was run in a “fat and happy manner” with plenty of cost-cutting potential. But although performance improved at first, it took a turn for the worse when City Link bosses subsequently misjudged the pricing environment. “It was a weak player in a weak pricing environment,” Moulton said.
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