Work Programme subcontractor to cease trading due to lack of working capital

Eco-Actif Services was spun out from the London Borough of Sutton to provide employment services to disadvantaged people

The Work Programme aims to get people into employment
The Work Programme aims to get people into employment

A community interest company providing Work Programme services has said it will cease trading because it cannot secure sufficient working capital.

Eco-Actif Services, a second-tier subcontractor under A4e, the prime provider, and the first-tier contractor 3SC in the east London region, said it had secured a £1m order book, but that its ability to deliver that new work was dependent on its ability to fund the delay between delivery and payment under payment-by-results contracts.

Anna Burke, managing director of Eco-Actif, which has an annual turnover of £700,000 and a staff of 14, said that the CIC had actually sought funding to meet a contract under the Families Programme, another payment-by-results programme working with troubled families. However it was the company’s Work Programme contract which prevented it from attracting funding.

A statement from Eco-Actif said: "We have been told that the government’s Work Programme is too high-risk, the prime contractors are not passing sufficient funds to the ultimate delivery organisations to make sufficient surplus to finance any loan, and our association with A4e is a matter of great concern."

"We are unable to hand back the Work Programme contract that is causing us such a great concern. On this basis it seems unlikely that we will now receive the funding we require to continue and we have decided to cease trading."

The CIC was one of the earlier social enterprises to spin out from a local authority. It was spun out of the London Borough of Sutton in 2006 to provide employment services, specialising in services for ex-offenders.

Burke said the CIC had spent a year speaking to specialist social finance providers and other lenders, and had also explored the possibility of a merger, but had been unsuccessful.

"The losers here will be the specialist ex-offender clients we work with," Burke said. "They are unlikely to receive the help they need elsewhere."

Martyn Oliver, chief executive of 3SC, said he was extremely concerned that the CIC had not approached his organisation earlier.

"We genuinely believe that we would have been able to help in this situation had we been told of this problem sooner," he said. "We feel we were on their side, and we could have provided some support."

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