The private equity baron Jon Moulton has infuriated MPs after claiming that managers at City Link, which went into administration on Christmas Day, deserved “seven or eight out of 10” for their work.
Mr Moulton, whose Better Capital group owned the parcel delivery firm, praised his failed managers in a fiery confrontation with MPs from the powerful Scottish affairs and business select committees yesterday. Better Capital lost £20m as a result of City Link’s collapse; the taxpayer has been left to pick up a £4m bill on redundancy payments, and small contractors, such as one-man van outfits, face heavy losses.
Adrian Bailey, the Business Committee’s chairman, told The Independent that the score was “outrageous” and said he would be calling Dave Smith, City Link’s last chief executive, for a separate hearing. Ann McKechin, a former shadow Scottish Secretary, added: “That should be a nil scorecard, particularly if you’re a small business facing a five-figure debt in January with no way of paying it.”
During the hearing, Mr Moulton insisted City Link’s management team had succeeded in areas such as reducing overheads and improving the group’s network of depots. Better Capital bought the courier from Rentokil for £1 in 2013.
However, Mr Moulton, who lost £2m of his estimated £225m fortune on the deal, added that City Link struggled in a competitive market. He said fees commanded for City Link’s work were falling and that it “couldn’t retain customers at a rate to make it economic to operate”.
“It was a very challenging deal: the company had lost somewhere in excess of £300m under its prior owners,” said Mr Moulton, who specialises in turning round failing businesses. “You don’t have to be particularly good at hindsight to realise the deal was a mistake.”
He later told The Independent that even “the world’s finest manager” would have only been able to keep City Link going for a few extra weeks. Brian Binley, a Conservative MP and businessman, told Mr Moulton that “the company was doomed when you took it over”.
MPs were particularly critical of Better Capital and City Link for the high proportion of drivers and contractors who were self-employed. Around 1,000 contractors lost their work when more than 2,300 direct employees were made redundant on New Year’s Eve.
These contractors had no employment protections, such as redundancy payouts, and many were dependent solely on income from City Link. The terms of working for the Coventry-based firm often involved displaying its logos on vans and not working for competitors.
Mr Moulton angered MPs by arguing that smaller contractors should have “diversified”, as there is always a risk that relying on a single customer could prove dangerous in the event of its collapse.
He was also questioned over a claim that Better Capital had set aside £2m on 22 December to ensure wages were covered for those delivering parcels up to Christmas Eve. However, Mr Moulton could not confirm whether this money had been paid to workers, while MPs pointed to examples of contractors not receiving money that was due on 19 December.
Mr Moulton, who founded Better Capital six weeks after he quit his best-known venture, Alchemy, in 2009, was also criticised for the wording of a letter to City Link’s auditors late last year. A senior member of the Better Capital team said it was the “current intention” to support City Link for a further 12 months, which Mr Moulton denied was a commitment.Reuse content