By Mark Kleinman, City Editor
More than 2,700 jobs are at risk over the festive period after one of the UK's biggest parcel delivery services companies collapsed into administration.
Sky News has learnt that City Link, which has been a perennial loss-maker, called in the professional services firm EY on Christmas Eve and immediately ceased accepting parcels from customers.
A public statement confirming the move is expected to be circulated on Friday.
The news comes at the start of what is expected to be a frenetic period for retailers, with many chains beginning their Boxing Day sales online 24 hours earlier.
City Link, which is owned by the investment firm headed by Jon Moulton, the veteran venture capitalist, is understood to count John Lewis among its largest clients.
John Lewis said it has transferred all its business with the company to alternative carriers.
"John Lewis has worked with City Link during this challenging period and provided significant support to enable them to trade," a spokesperson said.
"It is always a matter of deep regret when any of our suppliers are unable to continue with their business."
In a statement issued to Sky News, EY confirmed its appointment, saying it had put in place the ban on accepting new parcels at its Coventry head office, three other transport hubs and 53 depots across the UK.
"The company has entered administration as a result of continued substantial losses and is unable to continue accepting new parcels due to the further losses it would incur," it said.
The scale of possible job losses among City Link's 2,727 employees has not yet been identified, although EY said they were likely to be '"substantial" following an unsuccessful process to identify a new owner.
A number of staff would be retained to help return parcels to customers and assist with winding down City Link's operations, the administrator said.
Mr Moulton's firm, Better Capital, bought the courier and parcel delivery group last year, paying just £1 to its previous owner, the pest control firm Rentokil.
City Link has been loss-making for many years, suffering from poor systems and intense competition from rivals buoyed by the explosion in online shopping.
A number of competitors, such as Yodel, were the target of consumers' fury in the run-up to Christmas amid a series of delays.
Last month, Better Capital wrote down the value of its £40m investment in City Link by 50% and said that "various options to maximise the value of the (holding)".
In the wake of a £14m loss for the 2013-14 financial year, City Link's owner added that the business had "progressively deviated from its monthly profit budget during its current year to 31 December driving the conclusion that its current structure is unsustainable in the long term".
Better Capital blamed the worsening outlook on "excess (and increasing) capacity in the sector, made worse by customers developing their own delivery capabilities".
The administrators said customers who had handed over parcels to City Link on Christmas Eve should go to a depot to retrieve them on or after December 29.
The company's online parcel tracking system and helpline telephone numbers remained open to enable fulfilment of existing orders, EY added.
City Link's website said it had annual revenues of approximately £300m, a fleet of 1,700 vehicles and delivered 60m items each year.
A Better Capital spokesman could not be reached for comment.
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