Bulk of City Link staff face the axe
THOUSANDS of job losses are set to be announced at parcel delivery group City Link this week after it fell into administration on Christmas Eve.
The Coventry-based firm collapsed after exhausting a £40 million cash injection it received in April 2013 from its owner, private equity group Better Capital.
It went under despite receiving a letter from Better Capital on September 30, stating that it intended to provide City Link with the finance to carry on trading for another 12 months.
City Link employs 2,727, while a further 1,000 contractors, self-employed and agency staff depend on it for their livelihoods.
It is understood that the bulk of the workforce will be told within the next few days that they will be let go.
The firm collapsed before December's wages could be paid to its staff and as a result, the taxpayer could end up paying part of the redundancy bill.
Administrator EY has started the process of winding down City Link and selling off its assets, the proceeds of which will be used to pay its creditors, such as the logistics firm's employees.
If there is a shortfall in the amount owed to workers, the Government's Redundancy Payments Service will use national insurance fund money to compensate them.
City Link called in EY last week after racking up "substantial losses". The embattled delivery firm was losing up to £4 million a month.
According to its last set of accounts, City Link made a pre-tax loss of £21.1 million in 2013, on revenues of £289.5 million.
Transport union the RMT has lashed out at the timing of the administration, branding it "disgraceful".
Staff were informed of the firm's collapse on Christmas Day via the media. RMT general secretary Mick Cash said: "We believe there is a strong case for urgent Government intervention and, if it proves necessary, a rescue package to secure the future of the business and its employees."
However, although Business Secretary Vince Cable has agreed to meet the RMT to discuss the matter, a Government rescue is thought to be unlikely. Cable said of City Link's collapse: "This is a bitter blow to the workforce, many of whom have served the company loyally and now face huge uncertainty over Christmas."
