MPs criticise insolvency rules following City Link collapse

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

More than 2,300 of the parcel delivery company’s 2,727 staff were made redundant on New Year’s Eve 2014, after the business was put into administration at 7pm on Christmas Eve.

Many of the firm’s staff and contractors first heard about the closure from reports in the media on Christmas Day.

An offer for the business was rejected by administrators in the days that following the collapse. All 51 of its UK depots, including sites at Morley and Rotherham, were closed by early January.

MPs from two select committees have concluded the insolvency system was too heavily skewed in favour of investors and the taxpayer, at the expense of workers.

The report into the controversial closure of the company 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.

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, it said.

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.

The report said it regretted that City Link’s owners, Better Capital, felt its investors’ interests could only be protected at the expense of the delivery firm’s future, and its workers.