Recruitment Specialist Zenith People Rescued Through Pre-Pack Administration Sale
A significant number of employment positions on Tyneside have been preserved following the successful pre-pack administration sale of specialist recruitment business Zenith People. The Hebburn-based firm, which focuses on placing professionals within manufacturing, engineering and industrial sectors, faced considerable financial challenges last year that ultimately led to its collapse.
Financial Difficulties and Market Contraction
Zenith People encountered severe difficulties following the collapse of a key customer and after being refused support from the government's Redundancy Loan Scheme. The company had been operating at a loss for two consecutive years amid what administrators described as a "serious contraction" within its specialist market sector, coupled with rising employment costs that further strained its financial position.
Following mounting pressure from HMRC regarding outstanding tax obligations, administrators were appointed towards the end of last year. The business was subsequently marketed for sale, resulting in an agreement with director Angela Anderson to purchase the company for £126,000, with part of this sum payable over several months. This strategic transaction has successfully safeguarded 11 permanent positions along with approximately 80 temporary staff members who continue to work through the restructured business.
Substantial Creditor Debts Revealed
Administration documents published by insolvency specialists Leonard Curtis reveal that various creditors are owed an estimated total of £4.39 million. This substantial debt includes £1.29 million owed specifically to HMRC, highlighting the significant tax liabilities that contributed to the company's financial distress. The report further indicates that Zenith People has accumulated a deficit exceeding £1.1 million, with administrators suggesting it is highly unlikely that unsecured creditors will recover any of their outstanding funds.
Historical Performance and Pandemic Challenges
Insolvency specialists noted that Zenith People had previously traded successfully over many years, expanding its operations into additional sectors and navigating the considerable challenges presented by the pandemic. The company survived this difficult period with support from a Coronavirus Business Interruption Loan Scheme (CBILS) facility and invoice financing arrangements. However, the recovery period following the pandemic proved particularly challenging, leading to a series of time-to-pay arrangements being established with HMRC before the company ultimately entered administration.
Restructured Operations and Future Strategy
Angela Anderson commented on the restructuring process, stating: "In light of the challenges being faced by the business, we had to take action to move forward positively. Leonard Curtis helped us to achieve this, giving us newly streamlined operations, with increased efficiency and reduced overheads."
She further explained the transformed business model: "This has allowed us to create a fully integrated training and recruitment model which is both sustainable and unique in the North East. The new operations have already been well received by current and new clients alike."
The director elaborated on the innovative approach: "By leveraging funded and non-funded training, combined with recruitment services, we are now able to offer an integrated recruitment, onboarding and retention model, underpinned by HR support, which elevates sales conversations to board level and moves transactional relationships to long term partnerships."
Anderson concluded: "Ultimately, this allows us to protect our client base by embedding us into their strategic planning and moves conversations to strike a value-added rather than price-based tone, protecting core business and ensuring long term stability. The support provided by Leonard Curtis during this period has been nothing short of excellent."
Professional Support and Future Outlook
Mincoffs Solicitors acted on behalf of the joint administrators at Leonard Curtis throughout the process, working alongside leading receivables management company CRM. Iain Nairn, joint administrator, expressed satisfaction with the outcome: "We are delighted that we have successfully secured the long-term future of the company and its workforce."
The successful pre-pack administration sale represents a significant achievement in preserving skilled employment within the North East's specialist recruitment sector, despite the substantial financial challenges that led to the company's initial collapse. The restructured business now operates with a transformed model that combines recruitment services with comprehensive training solutions, positioning it for sustainable growth within the competitive regional market.
