Welfare to work scheme co-ordinating firm goes bankrupt
The government's controversial welfare to work initiative has suffered another blow after it emerged that a social enterprise firm hired to get the long-term jobless into employment has gone into liquidation, claiming banks refused to lend it money to stay afloat because they considered the work programme to be too financially risky.
Eco Actif, a community interest company based in Sutton, Surrey, closed suddenly on Friday morning. It provided employment support for around 500 people in the south-east of London, operating as a subcontractor in a regional supply chain headed by the welfare to work company A4e.
Its chief executive, Amanda Palmer-Roye, said Eco-Actif had performed well in getting people into work and had a £1m order book but had been unable to raise the capital to sustain itself under the government's payment by results system, under which firms must wait 18 months between delivery and payment.
In a letter to staff, Palmer-Roye said Eco Actif had approached both conventional banks and social finance providers for backing but had been refused on the grounds that the work programme was too high-risk and that "prime contractors are not passing sufficient funds to the ultimate delivery organisations to make sufficient surplus to finance any loan".
The letter added that its association with A4E had been a matter of great concern to potential investors.