SportsDirect (USC Dundonald)

Sandra Osborne Excerpts

Tuesday 27th January 2015 Westminster Hall

[Mr Donohoe]

I am coming to that, but he does not care a damn. That is clear, given what I am about to say.

The USC Dundonald situation is a murky affair. It leaves unanswered a lot of questions about the way some businesses are allowed to operate. For instance, did Diesel seek a winding-up notice on USC as a result of unpaid bills, as claimed in some reports? That is an answer that I need this afternoon. If so, what alternative courses of action were considered by SportsDirect—such as, for example, paying the bill to its loyal workers at Dundonald? Was USC/SportsDirect’s action in seeking administration a response to the claim made by Diesel or was it initiated by the company separately? Was there a delay in the timetable for granting administration and, if so, what was the impact on the work force and the potential timetables for redundancy and required consultation on both redundancy and business plans? Was that brought to the notice of the Department for Business, Innovation and Skills? What will the cost to the public purse be of supporting the 245 people who are out of work without back pay, holiday or redundancy payments and who have bonuses of as much as £12,000 outstanding?

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

I congratulate my hon. Friend on obtaining the debate. He is working hard on the issue, and he knows that many of my constituents were also employed in the business, and have lost their jobs because of this debacle. Yet again, a company in Ayrshire has behaved disgracefully —my hon. Friend knows what happened with the former coalfield sites. Is there a need to look at the way companies are allowed to do such things, treating employees so despicably, and to hold them accountable?

[Mr Donohoe]

I am grateful to my hon. Friend, whose constituency neighbours mine, as does that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson). I thank them for their support. I do not see any difference between the cases referred to, which is why there is a need to examine the law to protect workers in such circumstances. It is blatantly obvious that that does not happen now.

How long is it likely to take for the employees to receive payments from the administrators? Will employees get 100% of the money due to them? I doubt it. What sanctions can be imposed on the company for failing to consult employees about the future of their roles at the Dundonald site, or about redundancy? Given that all the companies in the exercise are owned by SportsDirect, is not it just a scam to let SportsDirect off its financial responsibilities to a less successful part of Ashley’s estimated £3.3 billion fortune?

--- Later in debate ---

[Jo Swinson]

I will happily talk to the sports Minister about those issues, and obviously there are specific issues for the Scottish Football Association to consider. Insolvency Service investigators are already in contact with the joint administrators of USC. That is at an early stage because the administration is fairly new, which affects the information that can be provided, but there is a legal duty to provide a confidential return to the Secretary of State about the directors’ conduct. Although the administrators’ view about that is certainly relevant, ultimately their assessment of whether there are grounds for disqualification is based on the Insolvency Service’s independent view and conclusions.

Directors can be disqualified for anything between two and 15 years. It is also worth noting that, in addition to director disqualification proceedings, the Insolvency Service can exercise its powers to investigate any UK company where it suspects misconduct. We are making it easier for disqualification proceedings to be brought where other laws have been broken—it is currently possible, but we want to make it crystal clear that it should be easier. Measures in the Small Business, Enterprise and Employment Bill explicitly state that, in deciding whether someone should be disqualified, the criteria that courts will be required to consider will be extended to include breaches of legislation. That could include health and safety law, immigration law or employment law.

[Sandra Osborne]

I have been listening to what the Minister has said. In my constituency, directors walked away from coal mines leaving £140 million of damage. I have been pursuing that matter with the insolvency people for two years and nothing has happened, so she will forgive me if I am slightly cynical about what she is saying.

[Jo Swinson]

I will be happy to look into the specific issues that the hon. Lady raises. Although the powers already exist, we recognise that making it more explicit that breaches of law can be considered in the disqualification process will make such cases easier. That is why we are changing the law. I will happily look separately at the specific case that she is pursuing.

I turn now to pre-packaged administrations, or pre-packs. They have been discussed in this House on many occasions, because there are understandable concerns about them. In a pre-pack, the sale of the viable parts of an insolvent company’s business is arranged before the administration starts and concludes shortly after the administrator is appointed. In the case we are debating, the administration has allowed the majority of the business, including more than 600 jobs across the UK, to be transferred to the purchaser, Republic, although unfortunately another 84 employees have lost their jobs.

It is important that we establish whether the pre-pack represented a necessary step to save an insolvent business, or if, as has been suggested, it was an abuse of the insolvency process. I reassure hon. Members that officials are looking at that as a matter of urgency. The changes that we are making, following the review of pre-packs by Teresa Graham, will mean that by spring there will be new checks and balances on pre-pack administrations where the sale is to a connected party, so that there is independent evaluation of whether that party is a viable business with a viable underlying business model that will not simply run into the same problems as the business in administration; there will also be evaluation of whether the sale represents the best value.