A midlands haulage firm whose main customer was Amazon collapsed into administration after setting up a German branch for the e-tail giant and falling foul of the country’s business laws.
In a report to creditors, administrators of New Generation Courier Logistics (NGCL) said that the company provided final mile delivery logistics and that Amazon comprised approximately 91% of its turnover.
It also provided warehousing services for a range of customers, but insolvency experts at Leonard Curtis said this had been unprofitable and the losses were supported by profits from the Amazon work.
NGCL adopted a model whereby it relied on self-employed drivers who would be contracted as and when required for final mile deliveries.
In 2020, Amazon asked NGCL if it wanted to branch out its business operations to Germany, but the decision proved problematic: “The company was unable to adopt the UK model under German law, as drivers were required to be employed by the entity rather than self-employed/contracted,” the report explained.
“We understand [the German business] had five sites set up to service the Amazon German contract and the company provided funding of almost £1.8m to launch this venture.”
The German company attempted to reduce overheads and costs by reducing the amount of sites it was running to three, but it continued to trade at a loss and finally ceased trading in March 2021; Leonard Curtis said at this point it owed NGCL £2.4m.
“As a result of [the German firm] being unable to repay the accrued intercompany debt, NGCL began suffering from cash flow difficulties to meet its ongoing liabilities to the subcontractors and the accruing liability to HM Revenue and Customs in respect of historic VAT,” it said.
Moves were then made to find investors or a buyer of the business but when this failed and NGCL was deemed to be insolvent on a cash flow basis, the company ceased trading and entered administration on 29 March.
The report added that secondary preferential creditor HMRC is owed more than £3m in taxes, so it is “unlikely” there will be any form of distribution to unsecured trade creditors.
The company held international operator licences for five operating centres in the West Midlands and East of England traffic areas, totalling 16 and 10 HGVs respectively.