Earl Transport in Accrington collapsed after almost 30 years of trading when its largest customer enforced “uneconomical” restrictions on a contract and then withheld a £156,000 payment, new documents revealed.
The Lancashire haulage company closed down in November after operating successfully for decades, with 13 jobs made redundant.
Administrator Opus Restructuring said problems emerged last year when there was a change in management at an unnamed company, which had a contract with Earl Transport.
The agreement accounted for 70% of Earl’s trading income and was already operating on very low margins.
Opus said the firm’s new management team attempted to introduce further restrictions on the contract and so a meeting was held to discuss the changes.
However, in a report to creditors, Opus said this “did not have the effect the director had hoped for.
“The customer withdrew the contract with immediate effect. To compound the company’s financial woes, the customer also withheld payment of a debtor balance of £156,000.”
Opus added that this balance was ultimately released and paid in full within eight weeks, but the delay hit Earl Transport’s already reduced cashflow.
“The loss of the contract income was replaced in part, but was not sufficient to allow continual trade whilst new work was sourced as margins were increasingly uneconomical,” it said.
To compound problems, the haulier was also battling increased fuel and staff costs and director Peter Hughes recognised that the ongoing losses would quickly erode the company’s position and take matters out of the operator’s control.
Opus said: “The director is 69 and given his age does not want to introduce personal monies or provide personal guarantees to lenders.
“The possibility of securing finance on, or disposing of surplus assets, was considered.
“The director believes funds raised would be insufficient to permanently resolve the position and would merely provide a temporary sticking plaster until the current costs and low margin result in further difficulties.”
The company entered administration on 14 November; Opus added that it was anticipated that there would be sufficient funds to pay a distribution to all classes of creditor.
