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SMEs will suffer the most as City Link closes


After 45 years, courier company City Link will no longer deliver next day parcels to Brits.

The timing could not have been worse last week, when the UK’s sixth largest courier City Link, was forced into administration on Christmas Eve, only for hundreds of employees to be informed on Christmas Day, by the media.

The Coventry based company was backed into a corner after years of “substantial losses”, and since appointed administrators Ernst & Young have failed to find a buyer, it is expected that some 2,000 employees will be made redundant on New Year’s Eve.

John Moulton, founder of City Link’s owner Better Capital, said yesterday that competition had become increasingly intense over recent months. He referred to online giant Amazon as well as low-cost competitors whose employees work with zero hour contracts.

“This was a medium-to-small-sized player in a fiercely competitive market” Moulton told The Financial Times.

Depots will open again today for customers to collect an estimated 1m City LInk parcels stuck in translation.

Roger Sumner-Rivers, ParcelHero MD comments:

“Large retailers like John Lewis will quickly adjust their operations to divert shipments to other suppliers. However it is SMEs - who will often not have established relationships with multiple couriers, and rely on City Link for all their deliveries - that are in the biggest quandary. They will have to find a new supplier and set up account facilities before 2nd January or face not being able to deliver orders to their customers.”

UK couriers have been working hard recently to increase productivity and profits by cutting capacity (Yodel for example, has halved the number of depots it operates since 2010). This has led to capacity constraints, such as Yodel’s announcement in December that it was suspending collections due to unprecedented demand that it couldn’t cope with.

In September this year, IMRG said it expected UK carrier-delivered orders to increase 19% year on year to 895m parcels and UK Mail announced volumes up 16% to March 2014. Carriers are responding to this increased demand with new investment with DPD spending £175m over the next five years to expand delivery capacity, and Parcelforce £75m over four years. These investments however, will take time - DPD’s plans for a new £100m hub in the East Midlands got the green light in July 2013, but it won’t be ready until September 2015.

Sumner-Rivers warns:

“As a result, there are now serious concerns as to how the carriers left in the market are going to be able to absorb the estimated 76m additional parcels City Link delivered each year, and how quickly they will be able to sign up customers and set them up to ship. The companies will all require immediate service, which will put a huge burden on every carrier’s infrastructure, from the sales department right through the network to the delivery couriers at the other end.”

Published on Monday 29 December by Veebs Sabharwal

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