Exclusive: Crown Agents faces collapse

Crown Agents, one of the U.K.’s most established development contractors, says it is experiencing “severe financial difficulties” and is understood to be days away from closure. The nonprofit company is one of the Foreign, Commonwealth & Development Office’s, or FCDO, largest suppliers, but has faced financial problems for years due to historic pensions deficits and aid cuts. It said that after months of negotiation, it failed to secure the financial backing it needed to continue. Crown Agents has offices in 20 countries and 340 staff members, who are understood to have today received only 50% of the pay they were due for July. It is urgently searching for replacement organizations to deliver critical contracts, including humanitarian and health programs, in countries including Ukraine, South Sudan, Zimbabwe, and Sierra Leone. Crown Agents started life as a British government body back in the 18th century but was spun out as a social enterprise in 1997. Its financial difficulties go back to that point when it inherited liability for the expensive “defined benefit” pensions of U.K. government staff, which over the past quarter of a century have become more and more difficult to fund. Its pensions deficit currently stands at around £50 million (about $64 million) — almost a year’s revenue. Crown Agents also blamed significant ODA cuts from the British government, which have cost it millions of pounds a year. Funding cuts have been compounded by increased competition from big United States firms, many of which have opened offices in London in recent years, and which have squeezed out several domestic British competitors. The company also blamed what it described as a frustrated energy procurement contract in Ukraine which it said “took significant working capital out of the organisation.” A restructuring process announced in March was intended to deal with the organization’s financial struggles, but the company said it had since tried, unsuccessfully, to raise further capital. “Crown Agents has experienced some recent significant financial challenges which it has been seeking to resolve over the last few months by seeking further investment in the company and its operations,” the company said in a statement. “The directors have been working as hard as they can over the last few months to attract new investment and funding for the business but unfortunately, whilst there was much support for the work we do, it recently became clear that actual commitments to provide the cash required going forward were not forthcoming.” “Throughout its proud history, Crown Agents has been at the forefront of international development delivery using its procurement, freight forwarding, health and humanitarian capabilities to reach millions of people around the globe. In recent years we have had a particular focus on the global COVID-19 response and humanitarian efforts in Ukraine. We want to thank all our staff and partners for everything that has been achieved.” Crown Agents is established as a limited company with the Crown Agents Foundation as the sole shareholder. Its latest accounts for the year ending June 2022 struck a positive tone, reporting a 29% growth in top-line income to £62.5 million and a surplus before tax of £2.4 million. That income included almost £9 million from its new charitable branch, Crown Agents International Development, or CAID, which was launched to diversify its income. The report noted that “the Directors are confident of delivering profits for a sustained period” and raised no concerns about its ability to operate for the next 12 months. Crown Agents Limited’s 2023 accounts are not due until September. However, CAID’s 2023 accounts, which must be filed with the Charity Commission, are more than two months overdue. CAID, which has an independent board of trustees, is understood to be considering its way forward. Crown Agents Bank, which shares branding with the organization, is a legally separate entity and will not be affected. Got information about this story? Contact our reporter at jessica.abrahams@devex.com.