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| MPs announce inquiry into Thomas Cook collapse | MPs announce inquiry into Thomas Cook collapse |
| (about 3 hours later) | |
| MPs are to hold an inquiry into the role of “corporate greed” in the collapse of Thomas Cook, focusing on directors’ stewardship of the company, how much they were paid and how its accounts were prepared and signed off by auditors. | |
| As the business, energy and industrial strategy committee announced the wide-ranging inquiry, the business minister, Andrea Leadsom, set up a taskforce to help those affected by the corporate failure, but was accused of “shutting the stable door after the horse has bolted”. | |
| MPs announced the investigation four days after the high-profile demise of the world’s oldest tour operator, which forced an ongoing, taxpayer-funded repatriation of 150,000 UK holidaymakers and put 9,000 British jobs at risk. | |
| The BEIS committee chair, Rachel Reeves, has also written to Leadsom to raise concerns about the slow progress of audit reform. The audit profession has come under pressure in recent years after a string of high-profile collapses, including Patisserie Valerie and Carillion, both of which were investigated by the BEIS committee. | |
| Brexit“There is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer,” said the chief executive, Peter Fankhauser, in May. But it cannot be the whole story - arch-rival Tui has coped because its finances are healthier. | Brexit“There is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer,” said the chief executive, Peter Fankhauser, in May. But it cannot be the whole story - arch-rival Tui has coped because its finances are healthier. |
| WeatherThe summer heatwave of 2018 encouraged would-be holidaymakers to stay at home, undermining prices in the “lates” market where operators try to clear unsold holidays. There seems to have been a hangover into 2019, with customers calculating that waiting to book is a productive strategy. | WeatherThe summer heatwave of 2018 encouraged would-be holidaymakers to stay at home, undermining prices in the “lates” market where operators try to clear unsold holidays. There seems to have been a hangover into 2019, with customers calculating that waiting to book is a productive strategy. |
| CompetitionA pincer movement of Airbnb and budget holidays has changed consumer behaviour, though Thomas Cook still managed to sell 11m package holidays last year. | CompetitionA pincer movement of Airbnb and budget holidays has changed consumer behaviour, though Thomas Cook still managed to sell 11m package holidays last year. |
| Banks and debtThe tour operator has been attempting to shoulder a huge pile of debt for the past decade – £1.7bn worth at the last count. Successive managements failed to remove meaningful chunks. The banks argue they have supported an overstretched company for years and the details of why it could not be saved may have to await the report from the Insolvency Service. | Banks and debtThe tour operator has been attempting to shoulder a huge pile of debt for the past decade – £1.7bn worth at the last count. Successive managements failed to remove meaningful chunks. The banks argue they have supported an overstretched company for years and the details of why it could not be saved may have to await the report from the Insolvency Service. |
| Bad managementThomas Cook’s borrowings were too high. The moral of the tale is that tour operators should fund themselves conservatively. If your balance sheet is fragile, you are at the mercy of events in an industry where most of the cash arrives in the summer and then flows out in the winter. | Bad managementThomas Cook’s borrowings were too high. The moral of the tale is that tour operators should fund themselves conservatively. If your balance sheet is fragile, you are at the mercy of events in an industry where most of the cash arrives in the summer and then flows out in the winter. |
| Nils Pratley, financial editor | Nils Pratley, financial editor |
| Britain’s accountancy regulator is also considering whether to investigate the demise of Thomas Cook, which was audited by EY. | |
| The BEIS committee’s hearings are expected to start in mid-October, with former directors, auditors, the accounting regulator and the insolvency service expected to give evidence. | |
| Reeves said: “The collapse of Thomas Cook has uncovered what appears to be a sorry tale of corporate greed, raising serious questions about the actions of Thomas Cook’s bosses and their stewardship of the business. | |
| “This latest corporate failure has shone a light once again on the use of aggressive accounting methods to aid bumper payouts to company executives and the apparent inability of auditors and regulators to curb these practices in the wider interests of shareholders, investors, and the public. | |
| “The BEIS committee has a long-standing interest in corporate governance, executive pay and audit reform, which we are keen to follow up in this inquiry. The main players in the sad demise of Britain’s oldest travel firm should face public scrutiny and be held to account for their actions before the company collapsed.” | |
| Current and former Thomas Cook executives have been criticised in recent days after it emerged that its last three chief executives alone had taken home pay packages worth a combined £35m over the past 12 years. | Current and former Thomas Cook executives have been criticised in recent days after it emerged that its last three chief executives alone had taken home pay packages worth a combined £35m over the past 12 years. |
| The transport minister, Grant Shapps, who faced ridicule earlier this week for plagiarising his predecessor Chris Grayling’s statement on collapsed airline Monarch, indicated earlier this week that Thomas Cook executives could have some of their bonuses seized. However, the £4.6m bonus awarded to the most recent chief executive, Peter Fankhauser, was paid mostly in shares that are understood not to have been sold and are now worthless. | |
| Leadsom has asked the insolvency service, which is overseeing the liquidation of Thomas Cook, to investigate the role of directors in its collapse. She also hosted a roundtable meeting on Thursday with trade unions and officials to look into ways to support staff and communities affected by one of the largest corporate failures in UK history. | |
| Row breaks out over government's refusal to rescue Thomas Cook | |
| Speaking after the meeting, one trade union official described Leadsom’s taskforce as “like shutting the stable door after the horse has bolted”. | |
| Manuel Cortes, general secretary of the transport workers’ union TSSA, said ministers should be hauled before the BEIS committee’s inquiry to explain why the government wasn’t prepared to invest in Thomas Cook, given the determination of its biggest shareholder – Chinese conglomerate Fosun – to continue putting money into the business. | |
| He said: “For example – why would a private company like Fosun be prepared to put £450m into a company which had no future? I have had no reasonable response from ministers on this point. | |
| “I’m calling on the committee to bring ministers before them so we can get answers as to why, as has been widely reported, the Turkish and Spanish governments were prepared to make substantial investments to support Thomas Cook but the British government refused to allow that to happen.” | |
| Referring to the German government’s offer to rescue Thomas Cook’s Frankfurt-based airline with a bridging loan, he added: “Of course, most recently the German government provided €350m to save Thomas Cook’s subsidiary – Condor – as our government simply sat on its hands.” | |
| Thomas Cook | Thomas Cook |
| Travel & leisure | Travel & leisure |
| Executive pay and bonuses | Executive pay and bonuses |
| Andrea Leadsom | |
| Regulators | Regulators |
| news | news |
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