City Link failure shows limits of cost-cutting

A depot with a green and yellow City Link sign above, and several green Renault Premium trucks with yellow City Link trailers halfway out.City Link: 2,000 staff to be made redundant on NYE - RMT

Last week the British logistics firm City Link went into administration, with the potential loss of nearly 5,000 jobs once self-employed contractors and the supply chain are taken into account. The firm started as an adjunct to the British Rail Red Star parcels operation, allowing parcels to be transported by rail without the need for direct train links and actually delivered rather than simply held at train stations, but since British Rail was broken up in the 1990s, they had to provide their own distribution network. The company had been part of the Rentokil Initial group from 2006 to 2013 but was sold for £1 in April 2013 to Better Capital, who reportedly invested £40m in the company (a small amount according to the staff union) but could not turn around the company’s losses or find a buyer. They went into administration on Christmas Eve and announced it on Christmas Day, presumably once most of the Christmas parcels had been delivered.

I’ve worked for City Link only twice, a day each; once was as a van driver in south London (that was the time they had me drive around after 5pm visiting closed business addresses, just so they could prove the delivery had been attempted), and the second more recently as a class 1 driver out of their Heathrow depot. That time, I was misinformed as to what the job involved, the trailer had the wrong fittings so the curtain could not be secured adequately (I did report this, but was given the impression that the problem would not be fixed) and also lacked internal straps, which are used to make sure that pallets or cages cannot fall out, either in transit or when the curtain is opened (in this case, they put tall cages on the upper shelf of a double-deck trailer). So, I’m not out of a job myself, but as I don’t have a full-time job and most of my work at present is through agencies, I expect the competition to be tougher in the coming months.

The company had 2,700 actual employees, and the BBC report above gives a breakdown of where they are located. Three of the depots had one or two staff, which I am told were caretakers as the actual depots were closed in the autumn and their work transferred to neighbouring depots. That the company was closing depots for places that size (Reading, Leeds and Leicester, plus Newmarket which served much of East Anglia) should have rang alarm bells, particularly as some did not have obvious neighbours (like Reading and Newmarket). However, the company’s ‘investment’ consisted of introducing new uniforms and scanners, some of which the staff had to pay for themselves and which some users complained were unnecessary as the old ones worked perfectly well (although, perhaps, they were incompatible with the company’s new IT systems). People did know about the plans to close CityLink on Christmas Eve as someone mentioned this on a thread on the truck drivers’ forum TruckNet, although it was slipped into a thread about another company so went unnoticed at the time.

The failure of City Link should show up some of the problems with the way many large companies do business at the moment. More and more regular work is casualised, with middle-men having to be paid as well but the workers (drivers or warehouse staff, usually) getting less. Other work is converted from proper employment to self-employment, with the worker responsible for buying or leasing the van, his uniform and PDA to manage deliveries and communicate with the depot, and maintaining the vehicle also (but, of course, this cuts the unemployment figures and allows the government to claim an upsurge in “entrepreneurial spirit”). One of the companies which delivers on behalf of online and catalogue ordering firms, called Hermes, relies entirely on self-employed drivers who use their own vehicles to deliver small parcels; the recipient is unlikely to ever come across the name when doing business with them. That’s all very well if the vehicle is a car you owned anyway for personal use and the parcel delivery money was never your main income; if you bought a van to make a living delivering parcels for one company, still more if you invested in a truck and a trailer, and an operator’s licence, and a maintenance contract, and a place to store it, and the courses required to become your own transport manager, and you cannot find other sources of revenue quickly after your main or only source of business goes bust, you are going to be seriously out of pocket. And unlike the full-time staff, you will not be getting any redundancy money.

I’ve been working for agencies for more than ten years. The wages have scarcely gone up in that time. In Surrey, minimum wage caught up with the agency van drivers’ wages a couple of years ago; small truck drivers are not far ahead of it. About three years ago, agencies suddenly began offloading their payroll operations, insisting that drivers open up “limited companies” or become sole traders, handling their own tax affairs. Others farmed them out to “umbrella companies”, insisting that drivers could offset their fuel and food bills against taxation. However, the umbrella companies also took a cut of your wages for these “services”, so the apparent “pay rise” was actually clawed back and your £9 an hour was actually £8 or less (and that was before tax). Your holiday money is also paid up front. How much of this is down to competition from eastern European migrants I am not sure, but the industry also has very weak union involvement — they do not work well when workers often nominally “own the means of production”, are not in daily contact with each other and thus cannot encourage each other to join the union in the first place, to take strike or other industrial action, to bargain with their employers in any way.

And, of course, customer service is suffering as well. When you were expecting a parcel, you were once able to call your local depot and ask if it had been received and if it had been loaded onto a van. Now, if you have a number to call, it will be an 08 number to a national (or overseas) call centre. On many mobile phone contracts, all 08 numbers, including ‘free’ or local-rate numbers, are premium-rate and not included in your price plan (some new contracts do offer 08 numbers on the price, plan, however). They all now have online tracking systems, but all they will tell you is that the parcel is “out for delivery”, not where it is on the list of deliveries, and some of them simply do not work on mobile devices.

The fall-out from City Link will be typical of the state of employment in the UK generally: the decline of wages, the decline of ‘proper jobs’, i.e. full-time employment with a company, the rise of part-time self-employment, casual labour and under-employment at a time when the cost of living in some parts of the country is rising and 2-bedroom houses sell for what used to be the cost of a mansion. It goes to show that you can cut your service standards and your employees’ standards of living to the bone and still go bust. We need an end to fake self-employment, which is nothing but a scam that allows companies to offload their liabilities onto their staff. Of course, it will take a government that is minded to act on behalf of ordinary people and not just their rich party donors and friends. Perhaps the failure of City Link could not have been avoided (or perhaps it should have been wound up sooner) but we can make sure that workers are paid off properly and not left with what should be the company’s own liabilities.

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  • M Risbrook

    Another 2,000 or so potential UKIP voters in the pipeline. The EU, and it’s competition policies, are largely responsible for generating the casualising of employment in recent years but the left and the unions have failed to cotton onto this fact. At least the working classes are beginning to wake up and smell the coffee.

  • George Carty

    I suspect that across the Channel, Marine Le Pen and her Front National would be able to do very well by pointing out how François Hollande has been powerless to help the French working class because of the euro (Hollande seems to me to be the French version of Ramsay MacDonald…)