Carcraft

Joan Ryan Excerpts

Wednesday 10th June 2015 Westminster Hall

[Liz McInnes]

I thank my hon. Friend for her intervention. I hope that the Minister will be able to respond to that question. I am not sure whether PPI claims against this company will be able to be pursued.

I have no doubt that everyone in the Chamber has received unwanted calls, emails or texts from companies volunteering to help them to claim for PPI mis-selling. In my case—I am sure this also applies to others—that advice is for PPI that I have never actually taken out. However, the industry around PPI does demonstrate the numbers involved and the size of the marketplace for such claims. The House needs to note that more companies may end up involved in insolvency in the coming months and years because of PPI.

None of this is too surprising. Businesses, sadly, do not always succeed, and in every constituency companies large and small have gone into receivership. During the previous Parliament, 99,530 companies applied for insolvency. The things that concern me about the closure of Carcraft are the decisions taken by the directors, the timing and the lack of consultation with staff and customers. Given that the directors realised in late 2014 that the balance sheet was insolvent and Carcraft was moving towards engaging an administrator, I am surprised that it did not begin a consultation with its employees.

The Manchester Evening News has reported that staff were told only hours before the company entered administration. Staff have said that even after they raised concerns about the future of the company, management told them that everything was fine. Obviously, that was not the case, and staff had their fears confirmed when administrators arrived with redundancy letters for all of them. Even worse, at that point managers reportedly told staff that they had known for at least three months that that might happen. People had turned down opportunities to take jobs elsewhere because managers had assured them that their jobs were secure. Now those folk are left with no jobs, secure or otherwise.

[Joan Ryan (Enfield North) (Lab)]

I, too, congratulate my hon. Friend on securing the debate, which affects people in Enfield North and their work. I have found it very difficult to get any information from anybody—the administrators or the solicitors who seek to bring a group action—about the former employees, and I am concerned about what is happening to them. They were left high and dry and given no information by the company, and they will now need support to find employment. We cannot turn the clock back and bring the company back, but those former employees deserve some support. I have had difficulty finding out the number of people involved and what has happened since in order to be able to give them that support. Does my hon. Friend have any further information? I hope that the Minister will also address the matter.

[Liz McInnes]

I understand that the Carcraft outlets employed between 25 and 50 people, but I can get exact figures to my right hon. Friend after the debate. The major employment was in my constituency, where we have lost about 150 jobs. I will go on to talk about the support available, if she will bear with me. There is some support available for staff, but it is on a fairly impromptu basis.

My right hon. Friend referred to legal action. Some of the staff who have been displaced are consulting employment lawyers about bringing legal action against Carcraft. Although staff will receive their statutory redundancy payment, they will struggle to obtain notice pay and unpaid holiday pay. However, because that is now likely to form part of legal action, I do not intend to say any more on the matter at this stage.

When a business such as Carcraft enters administration, another important cost is that incurred by customers, who chose to spend their hard-earned money at Carcraft on vehicles or on packages—such as the “Drive Happy” guarantee—that included servicing, warranty, MOTs and roadside assistance. Customers who bought such packages now have to find those services elsewhere, and they are certainly not driving happy, especially if they were sold the packages only days before Carcraft announced that it was going into administration. Staff have confirmed that they sold vehicles and guarantee packages until the night before the administrators stopped trading.

I am troubled by the fact that Carcraft continued to sell goods in early 2015, despite knowing that administration was highly likely. Of course, it is illegal to continue to trade only after insolvency has been confirmed, but there is something unfair and slightly disreputable about a company that trades in the knowledge that it is highly unlikely to be able to provide the promised services. In the case of the “Drive Happy” package, 29,000 people across the country paid for services that they can no longer receive. Luckily, only a small number of customers bought cars and were unable to collect them, and the administrators have made arrangements with those customers.

Not everything in this situation has been negative. A number of organisations, formal and otherwise, have come to the aid of those most adversely affected by Carcraft’s entering administration.

As my right hon. Friend the Member for Enfield North (Joan Ryan) mentioned, it is important to talk about support for those who have lost their jobs. The devastating impact of the sudden loss of a job on family wellbeing cannot be underestimated. The administrators, along with ERA Solutions, which specialises in assistance on employee matters when a company goes into administration, have provided advice to employees and supported them in accessing help from local jobcentres. Rochdale Borough Council has been in touch with employees in my constituency who were directly affected, and other councils around the country have done similarly. Rochdale has given help and advice to those who wanted it on matters including how to apply for relevant benefits and support, and how to start up their own businesses should they wish to.

The industry has come together to attempt to offer support. The former CEO Robin Bridge, who is now a director of Vehicle Trading Group, quickly joined forces with Andy Coulthurst of Motors.co.uk to help employees of Carcraft. They have set up a Facebook group in which they encourage former employees to send CVs and ask companies whether there are jobs in the industry for those staff. As we might imagine, the response has been overwhelming. Several key members of the industry have provided support, and that is a promising example of a community coming together.

A further example of the industry helping to support its own members is the involvement of the Automotive Industry Charity, to which the administrators ensured employees had direct access. The organisation—once known as the Motor and Allied Trades Benevolent Fund, but now known simply as BEN—has informed those affected that it provides listening and advice services, and help with accessing support from the right organisations, through its helpline. BEN’s welfare and care services are available not only to anyone employed in the sector, but to their whole families. That takes its reach to an estimated 3.84 million people in the UK alone.

In the wake of the news about Carcraft’s going into administration, BEN was proactive in contacting the administrator, Grant Thornton, to make it aware of the services available to staff. Additionally, BEN was proactive in sharing contact information, website details and contact numbers on its social media and digital platforms. Although the details of contact made by employees are confidential, BEN has confirmed to me that it received a number of inquiries on the back of the Carcraft closure, in response to which details of the following services were provided.

Employment law and legal advice was provided, including details of the Advisory, Conciliation and Arbitration Service and civil legal advice. Advice was given on dealing with redundancy, including reference to Citizens Advice and the Money Advice Service and direction to online materials. Guidance was given on employee welfare rights and benefit entitlement through Citizens Advice and the jobcentre. Budgeting and debt advice was given through the Money Advice Service, Citizens Advice and StepChange. As it is challenging to talk about many of those issues in the work context, BEN supplemented the work undertaken by existing in-house or state-run benefits provisions. A spokesperson from BEN said:

“Given that many of the employees were only made aware of the situation when they arrived at work…a vast number will…be experiencing shock, stress, worry and an uncertain future. As yet, the full details of the circumstances and the long term future impact cannot be assessed.”

That stark fact cannot be ignored.

The sudden impact of job loss on an individual, their family and, ultimately, the community must be investigated so that people are not exposed to such difficult circumstances without prior warning. I urge the House to consider what the Government are doing to protect workers when an employer goes into administration. How do the Government plan to improve protections both for employees of companies facing insolvency and for customers of such businesses? Do the Government have any plans to legislate to improve workers’ rights in such situations? What can be done to ensure that the Insolvency Service amends the status of former employees to something other than preferential creditors?

It is also vital to ensure that, particularly in times of economic struggle, customers are given the maximum possible protections. What will the Government do to ensure that businesses with insolvent balance sheets or similar financial difficulties are more responsible in the selling of products and services that they may not be able to provide in subsequent weeks or months? The Minister will no doubt tell us all about the Government’s long-term economic plan and the number of jobs that have been created, but there is still a lot of concern about the nature of such jobs. Some 474 full-time jobs with a pension scheme and protections have been lost, and a high number of the jobs that may replace them will be part time, self-employed or on zero-hours contracts. All the talk of economic recovery is not reflected in the day-to-day lives of my constituents and, indeed, others across the country. We must use this opportunity to change that and improve the lives and livelihoods of the people of this country.

I look forward to the Minister’s response. I hope that, following this debate, I will be able to provide my affected constituents with some reassurance.

--- Later in debate ---

[Joan Ryan (Enfield North) (Lab)]

I am not sure that this issue would be on the agenda at all if it was not for my hon. Friend the Member for Heywood and Middleton (Liz McInnes) securing this debate, which is a matter of concern. I am keen to hear what the Minister, or her predecessor, knew of this situation. I was not here in the last Parliament, and we only got notice of this closure a week before the general election, so the timing is extremely difficult and it is very hard for anyone to be abreast of this situation.

This issue could have easily just disappeared, and yet we are talking about a big company and a lot of jobs. To echo what my hon. Friend the Member for Rochdale (Simon Danczuk) has said, on behalf of customers and employees of Carcraft, I am very concerned about the points raised by my hon. Friend the Member for Heywood and Middleton about how long it was known that the company was in major financial difficulties, how little notice was given to employees and how little discussion there seems to have been with them. One would have expected the company to feel some smidgen of loyalty to these people; I am quite surprised at how cavalier it seems to have been. I might be harsh in saying that, and I am willing to be corrected, but on the face of it, and given the information we have received, it does not seem that I am being particularly harsh.

I hope that we will get a lot more information to take back to our constituencies, so that our constituents who are customers or employees of this company are not left high and dry. There is some local awareness of this issue, and interest in what is happening, and hopefully customers and employees now feel that there is somewhere that they can raise their issues. However, we need more information.

I pay tribute to BEN; I, too, have also been in touch with it, and I am impressed by its proactive approach and the support it is providing. If it was not for BEN, I am not sure that anybody would be providing any support, and if it was not for my hon. Friend the Member for Heywood and Middleton, I am not sure that anybody would be talking about this issue, which is of real concern.

--- Later in debate ---

[Anna Soubry]

It would be absolutely wrong of me to give any advice, because I do not know the answer to that question. I can make full inquiries and write to the hon. Gentleman, but I do not know the answer. Some loans were retained by the Carcraft group, and what happens to them will depend on the type of loan that the customer had. I understand that borrowers are being notified about that.

Additionally, as we have heard, Carcraft provided an MOT, servicing, warranty and roadside assistance package known as a “Drive Happy” plan. The administrators are not able to provide for continuation of that service and have informed my officials that they intend to contact all affected customers with such a plan, to make arrangements to reduce monthly payments so that they will no longer be paying for that service. If any consumers are worried about their payments or how services might be affected, they should speak to Citizens Advice or other advisors who can explain their options and give them the quality advice they obviously need.

Hon. Members have raised concerns about directors’ conduct, and there are obvious concerns about the effect of Carcraft’s closure on jobs and the local economy. I will talk briefly about the actions that Government can take if director malpractice is suspected. Whenever a company enters administration, the conduct of its directors is looked into by the administrators. If evidence of unfit conduct is found, a director can be disqualified from acting as a director for between two and 15 years. My officials have been proactive in contacting the administrators to discuss the directors’ conduct in this case; we have already raised the matter with them.

As I set out in my response to the written question of 27 May from the hon. Member for Heywood and Middleton, the Insolvency Service made early contact with the administrators to discuss the circumstances surrounding the closure of Carcraft’s business, including the conduct of the directors. The Insolvency Service takes those matters seriously, as do all Governments. The Government are also talking to the Financial Conduct Authority, which regulates the financial services part of the Carcraft group. If there is cause for concern, it will be identified and investigated and any appropriate action taken, as I have explained. It is too early in the administration of Carcraft to form a view on the directors’ conduct, but I would mention that last year the Insolvency Service disqualified more than 1,200 directors in circumstances where their conduct fell short of the high standards that we expect of them. That of course means that they cannot do such work, which is a genuine punishment and says that their conduct does not entitle them to occupy what is an important role in any business.

As for redundancy payments, one of the hardest-hitting consequences of any insolvency is the risk of job losses and the impact on people’s lives. Although it is little consolation for the nearly 500 staff involved, they can claim certain outstanding payments, including up to eight weeks’ arrears of pay from the Government’s redundancy payments service, which has a maximum £475 a week. To make that happen as quickly as possible, the Government have already set up a dedicated team for former Carcraft employees, and to date 407 people have made use of the service—I am assuming that that is from around England and Wales. Their claims are being processed and moneys owed will be paid out as soon as possible. I want to make it clear that if any hon. Members have a single constituent who is not receiving the money they are owed, as a matter of some urgency they should not hesitate to write to me or to grab hold of me around the parliamentary estate. I take such matters extremely seriously. It is bad enough for someone to lose their job, but then not to have money that is owed to them is completely unacceptable.

[Joan Ryan]

I thank the Minister for her offer to be available, because I was a little worried about having difficulty in getting hold of the administrators. It is helpful to know that we can raise the matter on behalf of constituents who are in such a difficult situation.