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City Link bosses set up firm with similar name weeks before collapse

Birmingham | News | Published:

City Link bosses set up a new firm with a similar name just two weeks before the company collapsed, it has emerged.

A business called City Link B2B Limited was registered on December 9, a fortnight before administrators were called in.

David Smith, chief executive officer of City Link and Robert Peto, the financial director, were named as directors along with Tom Wright, a City Link director and assistant director at the company's owners, investment group Better Capital which is headed by Jon Moulton.

Administrators Ernst & Young said the new company had been set up in early December as part of efforts to save the logistics business. But those efforts were fruitless and City Link B2B never operated.

Ernst & Young's spokesman added: "The entity never traded with, nor contracted with any entity, related or third party. It is a redundant shell which is part of the CL group."

The collapse of City Link puts 608 jobs are at risk across the West Midlands – 404 in Coventry, 70 in Birmingham, 56 in Wednesbury, 40 in Stone and 38 in Shrewsbury.

The roots of the company's troubles date back to 2006 and a spectacularly botched £210 million merger between City Link, then owned by the Rentokil Initial group, and Target Express in Coventry.

At the time City Link employed around 600 people at its national parcel delivery depot at Midland Road, on the Willenhall/Darlaston border.

A string of problems saw customers deserting the business which starting racking up huge losses.

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It axed a fifth of its staff and then, in 2010, as part of continuing efforts to cut costs and get the business back into profit, the Black Country hub was shut. Some staff were moved to other depots but around 200 jobs were lost.

The hub, which stands next to the Poundland headquarters on the Black Country Route, was later bought by rival delivery group Yodel.

The losses continued, however, hitting £31 million in 2011 and £26m in 2012. In 2013 Rentokil Initial finally sold the business for just £1 to Better Capital, the restructuring group headed by veteran venture capitalist Jon Moulton. Rentokil effectively wrote off £40m on the sale.

Better Capital, which also owns fashion business Jaeger and double glazing firm Everest, says it pumped £40 million into trying to turn around City Link, but the losses continued.

In November a bullish City Link said recruited another 1,168 agency and subcontracted drivers, 469 warehouse staff and boosted its fleet by 434 vans as it prepared for the busy Christmas period.

But, behind the scenes, efforts to restructure the business or find a new buyer were proving unsuccessful and the end finally came on Christmas Day as administrators were called in.

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