Government guilty of ‘economic vandalism’ in handling of Thomas Cook collapse, reveals new report
- Monday 21 October 2019
The entire Thomas Cook group could have been saved from compulsory liquidation if the government had provided a financial guarantee of £138 million, according to a new report by consulting service Syndex.
The report also details how the government missed key opportunities to preserve at least parts of the Thomas Cook business and spent more of taxpayers’ money on repatriating passengers than was needed for rescuing the company.
Unite has released the report on the eve of giving evidence to the Business Energy and Industrial Strategy (BEIS) select committee’s inquiry in to the collapse of Thomas Cook. Unite assistant general secretary Diana Holland will give evidence tomorrow (Tuesday 22 Ocotber) at 10:15 to the committee.
The report confirmed that the Thomas Cook airline was profitable and had attracted several bidders, however those bidders did not meet Thomas Cook’s asking price of between £500- £600 million.
When the main group entered compulsory liquidation on Monday 23 September the airline followed suit as it had no working capital of its own as it was all tied up in the main group.
The Syndex report found that there was no legal reason why the government could not have provided a ‘bridging loan’ which would have kept the airline flying.
This was what occurred in Germany where the Thomas Cook subsidiary Condor received such a loan worth $415 million from its government. The UK airline’s financial needs were far lower than the amount needed to preserve Condor.
The report states by providing a bridging loan: “Thomas Cook could have continued to fly, saving hundreds of millions of pounds of public money spent on repatriation, and allowing time for the sale of an on-going business with all its employees.”
When the airline was then sold the bridging loan would have been paid back first, thus protecting the government’s investment.
The report also found that the much criticised UK insolvency law was not a complete obstacle to providing an alternative to allowing the entire company to slide into compulsory liquidation. However the report states: “The lack of clear procedures with a simple principle of saving potentially viable businesses, which operated in conjunction with the absence of stakeholder voices at the table, has again caused an undoubtedly viable business to cease trading.”
The report also highlights the different approach that the government took earlier this year when British Steel went into liquidation but was able to keep trading with government support while a buyer was sought.
Unite assistant general secretary Diana Holland said: “The government’s handling of Thomas Cook’s collapse was tantamount to economic vandalism.
“The independent research by Syndex clearly demonstrates that not only was allowing the entire Thomas Cook operation to fall into administration not in the best interests of the staff and holidaymakers, but the costs of repatriations are likely to have cost the taxpayer more than saving the business.
“This was alongside the lack of implementation of the clear steps set out in the airline insolvency review published by the government this year to avoid the immediate grounding of an airline. The steps currently allowed were not followed for Thomas Cook’s UK airline.
“The report further outlines that the difference between the stance of the UK government which allowed a profitable airline to fold and the German government, which acted to allow the subsidiary Condor to continue to fly, was principally an issue of political will.
“Unite will be urging the select committee to identify steps that could have been taken under current laws as well as to radically revise the insolvency laws, to ensure that companies and especially airlines can enter into a protected form of administration in order to allow businesses to continue to trade, saving jobs and allowing time for a buyer to be found.”
Stephane Portet, head of Syndex UK and Ireland said: “Thomas Cook’s airlines was profitable and could have been saved. The clearance by the EU of the bridging loan to Condor shows that the UK government was wrong when it refused to act.
“Following the precedent of British Steel, another solution was possible. This would have saved jobs and money from the taxpayers.
“The case of Thomas Cook is proof of the need for a profound reform of UK insolvency law but also of UK corporate governance. Workers’ representatives should have an enhanced right to information on the financial situation of the companies.”
For more information please contact Alex Flynn Unite head of media and campaigns on 020 3371 2066 or 07967 665869 email@example.com
Notes to editors:
Syndex is a strategic and financial consultancy working on behalf of workers’ representatives and unions. With 460 employees, 2,200 clients per year and offices in seven countries (France, UK, Ireland, Poland, Spain, Germany, Romania, Belgium), Syndex has been supporting workers’ representatives in the UK since 2014 and has been involved in some of the biggest restructuring and insolvencies in recent years. Syndex Group, the parent company of Syndex UK, is a chartered accountancy registered in France.
Unite is Britain and Ireland’s largest union with members working across all sectors of the economy. The general secretary is Len McCluskey.