City Link parcel delivery company goes into administration

[whole diary]

[Chris from Nailsea]

From the BBC^» (British Broadcasting Corporation - home page):

City Link parcel delivery company goes into administration



Parcel delivery company City Link, which employs 2,727 people, has gone into administration.

The company, owned by investment firm Better Capital, called in administrators on Christmas Eve after years of "substantial losses".

It stopped accepting parcels from customers at its head office and transport hub in Coventry, its three other transport hubs and 53 UK^▸ (United Kingdom) depots.

Administrators warned of "substantial redundancies" over the coming days. This is because no buyer has been found to save the company.

A number of staff will be retained to help return parcels to customers and help with winding down the company, said joint administrators Ernst & Young.

Operations will be suspended at all the company's depots until Monday when customers and recipients will be able to collect their parcels, which they have been urged to do as soon as possible. The firm's online parcel tracking system remains live and a help phone will be open on Saturday and then from December 29.

The other joint administrator, Hunter Kelly, said: "City Link Limited has incurred substantial losses over several years. These losses reflect a combination of intense competition in the sector, changing customer and parcel recipient preferences, and difficulties for the company in reducing its cost base.

"The strain of these losses became too great and all but used up Better Capital's ^40m investment, which was made in 2013 and intended to help to turn around the company. Despite the best efforts to save City Link Limited, including marketing the company for sale, it could not continue to operate as a going concern and administrators were appointed.

"We will provide support to employees relating to potential redundancies. We are now beginning the process of realising the company's assets."


Mick Cash replaced the late Bob Crow as general secretary of the RMT^▸ (National Union of Rail, Maritime & Transport Workers) in September

Mick Cash, general secretary of the RMT union, said: "This is the bitterest blow any group of workers could receive on Christmas Day and it is absolutely shocking that the company have sprung this announcement once all the Christmas deliveries have been completed. RMT will do everything within its power to mobilise a political and industrial fight to save the thousands of jobs that have been put at risk as a result of this shock announcement."

The RMT told its members on Christmas Eve that it understood that wages owed up to 31 December would be paid, but any further payments are not guaranteed.

It described the news in a circular as a "massive body blow to all our members at City Link who have made great efforts and sacrifices to their pay and terms and conditions in order to make the company a success since its current owners took control in 2013".

Founded in 1969, City Link said on its website it had annual revenues of approximately ^300m, a fleet of 1,700 vehicles and delivered 60 million items across the UK and worldwide each year.

I post this with a heavy heart, as a fellow delivery driver.  My heartfelt sympathy to all of those affected.  CfN. 

[ellendune]

It semi there are now too many distribution companies chasing a finite market. If there are too many the system becomes inefficient because vans are just following each other round.

[Chris from Nailsea]

Simply to clarify: I am a delivery driver for a retail grocery chain - not in competition with any parcel delivery company.  CfN. 

[bobm]

I must admit as a customer of City Link both as a sender and receiver I am surprised at the news. I can think of several delivery firms who are a lot worse than them.

I do however sympathise with the staff who have, no doubt, been pulling all the stops out over the last few weeks only to hear this news today.

[LiskeardRich]

I must admit as a customer of City Link both as a sender and receiver I am surprised at the news. I can think of several delivery firms who are a lot worse than them.

I do however sympathise with the staff who have, no doubt, been pulling all the stops out over the last few weeks only to hear this news today.

I'm not surprised, far from it in fact. Rentokil sold it for ^1 18 months ago, along with all its debt.
Their business model was out of date and pricing uncompetitive against the market. It's a market where customers aren't particulary worried about quality and price matters.

[ChrisB]

Most of the drivers have zero protection as they were sub-contrctors using their own vans, according to a report I saw last night

So, December income not gusranteed as their invoices not yet raised. Left with vans in CityLink livery that they themselves need to have removed before being able to look for other work.

Much sympathy I think. What happens when Venture Capitalists don't know how to run the types of company that they buy up. Frankly on the cards as soon as sold by Rentokill, but absolutely didn't need to do it at Christmas!

I hope many drivers appear outside the venture capitalist's office on the 5th January....and create a stink

[LiskeardRich]

RMT^▸ (National Union of Rail, Maritime & Transport Workers) have confirmed all will be paid up to 31st December.

[ChrisB]

That's staff, not the sub-contractors

[BerkshireBugsy]

It semi there are now too many distribution companies chasing a finite market. If there are too many the system becomes inefficient because vans are just following each other round.

Yes the market.may be finite but if the shopping model shifts from a presence on the high street /retail park to online shopping doesn't this also mean increased demand for delivery services ?

Just a question

[ellendune]

It semi there are now too many distribution companies chasing a finite market. If there are too many the system becomes inefficient because vans are just following each other round.

Yes the market.may be finite but if the shopping model shifts from a presence on the high street /retail park to online shopping doesn't this also mean increased demand for delivery services ?

Just a question

A good question. 

There was someone on the radio today saying that customers (us) are not prepared to pay what it costs for the delivery. So prices are rock bottom. City link started in the days when they could offer a premium service.

If there is just one company (Royal Mail) going round delivering parcels then they can optimise the use of the equipment (vans and depots). These costs are fixed to provide national coverage. When there were two, those fixed costs doubled.  I don't know how many there are now, but perhaps 10 or more.  If a distribution company cannot get a big enough market share at a high enough price to cover its largely fixed costs it is in deep trouble.

The free market economy is, I am afraid, very brutal.  This is the unacceptable face of the free market economy.  It also gives an edge to Royal Mail's concerns about the effect of cherry picking on the universal postal service. 

[BerkshireBugsy]

My only problem with Citylink was a geographical one (I haven't used them for a few years so this may have changed). If I missed delivery of a parcel I would have to drive from Thatcham to the far side of Reading to collect it from their office which I believe used to be on Suttons business park. But apart from that I had no issues with the service which I was prepared to pay for.

Sadly though I agree that in most cases where we are talking about low margin sales there is little opportunity to "hide" the delivery costs and that is where (in my opinion) the delivery companies are at risk when they to deliver at less than cost just to win the business.

[grahame]

Yes the market.may be finite but if the shopping model shifts from a presence on the high street /retail park to online shopping doesn't this also mean increased demand for delivery services ?

Just a question

When I saw the City Link news, I was reminded of a TV piece I saw the other day (BBC^» (British Broadcasting Corporation - home page), ? local) about the huge difference online shopping has made to the rural community, and saw their filming as they drove up the road from Tintern towards Monmouth, counting vehicles and comment on what a very high percentage of them were local delivery vehicles of some sort.

Certainly while we (on this forum) support public passenger transport, the ability to get a very wide range of products to the remotest of spots is no bad thing.  In reality, that ability has been there for many years, but until we had the internet the choosing and ordering end of the cycle was rather more difficult, and people tended to go into their local town for a far more limited (and expensive) range of products, and at an inefficient use of their time.   The rural and domestic urban online ordering and delivery has, though, hit bus use as fewer journeys are needed.

Are all delivery vehicles busy and running full all of the time?   I suspect there's rather a lot of duplication going on (as a small business it's not unusual for us to receive several deliveries in a day) and there is, I'm sure scope for efficiency.  Let's hope that the market is growing strongly enough for all of those who have no ongoing work through CityLink to find suitable alternatives;  I have (personally) been through redundancy twice and whilst it was a shock at the time, it meant that within a certain period I had moved on from a struggling business to an exciting one with prospects, and I didn't look back.

[BerkshireBugsy]

Good points well made Graham.

I have to be honest and say that whilst I'm not really surprised there has been a distribution company that has gone under they weren't the first and they won't be the last.

I do feel sorry for the staff who may have seen this coming but had to find out for sure on Christmas Day. My other concern is that I believe some distribution firms like Citylink effectively sub contract out the end point collection and delivery aspects. So the green and yellow vans we know are owned by the drivers and have to be "liveried" at the drivers cost.

So whilst the drivers still have their vans they still have to pay out to have them "unbranded" out of their own pockets

[eightf48544]

Roland Hill recognised that the postal service is a natural monopoly if it is to provided a universal service. He was a Victorian!

Hence the "Penny Black"

Competiton doesn't work what's the points of different postal services running half empty lorries up the M1 with mail for Birmingham when a train from Willesden can carry the lot. 

Also natural monopolies  are railways, buses. Competition within and between different forms of public transport is pointless.

 

[ChrisB]

Wh? Citylink aren't public transport, neither do they deliver post?

They're a courier company