The collapse of delivery company City Link has exposed that the insolvency system favours investors over workers, MPs have concluded.
Parliament’s Scottish Affairs and Business, Innovation and Skills Committees said the processes for company insolvency do not offer sufficient protection to workers, suppliers and contractors, and the balance should be shifted.
The joint report also said City Link took the “deliberate decision” not to inform employees and contractors of likely collapse.
The committee recommended that the Government should support a dialogue between unions, employers and insolvency professionals to develop best practice guidance for the sharing of information with employees and unions when an administration order is under consideration.
Adrian Bailey, chair of the Business, Innovation and Skills (BIS) committee, said: “Our joint evidence sessions highlighted an issue which former employees of City Link will sadly know only too well – that the current insolvency system fails to offer sufficient protection to workers, suppliers and contractors alike. Investors and directors are cushioned from the impact of failure while workers, suppliers, and contractors pay the highest price. The balance needs to be shifted so that our insolvency system is no longer skewed in favour of investors and directors.
“It is deeply regrettable that Better Capital felt its investors’ interests would be better served by abandoning City Link and its workers. Contractors, suppliers and workers were left high and dry – taking a serious financial hit – and are now left to struggle on in the wake of the decisions of Better Capital.”