LONDON — Staff at a for-profit development contractor which ran multimillion pound contracts for the United Kingdom’s Foreign & Commonwealth Office have been left without months of pay and pension contributions after the company announced it was insolvent and entering administration.
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Aktis Strategy Ltd. went into an insolvency process at the start of March, Andrew Rathmell, former director and co-founder, told Devex. He blamed Aktis’ demise on poor financial management which left the company unable to manage its rapid scale-up and growing portfolio of low-margin projects in fragile and conflict-affected countries.
Aktis is the second U.K. development contractor to go under since the beginning of the year — after veteran company Maxwell Stamp appointed administrators in January — raising questions about how major aid contracts are being managed by government departments, and whether companies are being asked to do too much for too little funding.
Dozens of staff, and a number of Aktis’ subcontractors, are understood to be owed several months of back pay, expenses, and pension contributions. Rathmell said he was working to try and recover some money for staff and suppliers.
“Aktis will be moving into administration this week with the focus of the administration being to generate maximum returns for all Aktis creditors, including staff and suppliers,” he wrote in an email to Devex.
Aktis was founded in 2013 and scaled rapidly to become one of FCO’s regular contractors for a range of security and development programs in countries including Iraq, Tunisia, Syria, Turkey, Somalia, and Lebanon.
FCO was its biggest client, mostly through the controversial cross-government Conflict, Stability and Security Fund. It also did work for the U.K. Department for International Development, as well as the Home Office, the Dutch and Danish governments, the European Union, the United Nations, and the U.S. Department of State.
At its peak in 2018, the company employed 150 staff and earned £24 million ($31.92 million) in revenue. However, it was beset by major cash flow problems and subsequently took on debt.
A three-page document and an email sent to staff by the directors at the beginning of March, and seen by Devex, indicated that the company had recently lost a number of major contracts, including from FCO, but did not say why. There had been an audit of its work in Iraq last year, although Rathmell said they had subsequently been given “a clean bill of health by the FCO and its external auditors.”
Aktis’ financial woes were further exacerbated by having to pay £597,000 to a former director, Matthew Waterfield, in 2017, according to the company's annual report. Waterfield filed for breach of contract and unfair dismissal but it was settled out of court.
Aktis’ cash flow problems started to emerge in the fall of 2018, according to the note, and nosedived toward the end of the year. In a bid to save the situation, in late 2018, the company brought in a new finance manager and cut nearly half of its staff.
Nonetheless, the financial situation was worse than anticipated, the note to staff said. In a last-ditch attempt to stay afloat, the company hired external advisory firm ReSolve in February to come up with a rescue deal, but it was rejected by Aktis’ funders, Rathmell told Devex.
“When it became evident that clients and investors could not see eye to eye on a way forward, the board had no choice but to seek support from administrators. Hence, Aktis went into an insolvency process at the start of March,” he wrote in an email to Devex.
He added that the company’s projects had been paused due to the insolvency process and that Aktis was now “seeking to work with clients to ensure a smooth transition of projects and to minimise disruption to delivery.” The email sent to staff two weeks ago said that FCO and Aktis’ other funders were looking to hand over Aktis’ contracts to alternative service providers.
Devex spoke to a number of former Aktis staffers, who asked to remain anonymous for professional reasons, who said that some had not been paid since August. Others said that Aktis’ suppliers were also out of pocket. Reviews on Glassdoor, a jobs and recruitment website, also refer to staff and suppliers not having been paid.
Staff complained of a lack of information about the true situation. “The directors kept giving very misleading communication to staff, saying we will be paying salaries on time for January … but none of that happened … they said this again in February … how do we go from that to being insolvent?” a former staffer told Devex.
They also recounted bailiffs showed up at the company’s London office in January and that staff were evicted and told to work from home.
The note sent to staff by Aktis’ managers earlier this month confirmed the issue and added that shareholders have also not been paid.
“It is really disappointing that, as a result of the company’s financial troubles, some staff will have missed out on back pay. It may be interesting to note that, after insolvency, the shareholders will have received no net pay since 2016,” the note said.
A number of former employees said they were pursuing legal channels to try to recover lost earnings.
An FCO spokesperson said they were unable to comment at this time.
“The government has a small number of contracts with Aktis Strategy Limited. We are unable to comment on any speculation about Aktis’ financial position,” they wrote in an email to Devex.