MPs slam company insolvency system

Monday 23 March 2015

The collapse of delivery firm City Link has exposed how company insolvencies do not offer enough protection to workers, according to a damning report.

MPs from two select committees said the system was too heavily skewed in favour of investors and the taxpayer, calling for the balance to be shifted.

The report into the controversial closure of the company over Christmas said that under current rules, it was in the financial interest of a company to break the law and ignore the statutory redundancy consultation period.

Any fine will be paid by the taxpayer, noted the Business and Scottish Affairs Select Committees.

Mick Cash, leader of the Rail, Maritime and Transport union, said the "shocking" report vindicated its complaint about the "carefully engineered collapse" of City Link.

He said: " Lives were wrecked, with the taxpayer footing a massive bill, while those responsible skipped away unscathed and with large chunks of their assets protected."

The company was placed into administration at 7pm on Christmas Eve following several years of losses.

For many of the 2,727 staff and 1,000 contractors, the first confirmation that their jobs and livelihoods were at risk came from reports in the media on Christmas Day.

The report said under the current system, those who have given secure credit to a company are "cushioned" from the impact of an insolvency because losses are borne by workers, contractors or suppliers.

Ignoring the consultation period with workers had a "high human cost" that appeared not to have been taken into account in the City Link case, said the report.

The committees recommended the Government should support dialogue between unions, employers and insolvency experts to improve communication when administration is being considered, and to review arrangements for sharing information.