Firms handed £1.3bn in Covid contracts claimed £1bn in furlough grants

HM Revenue and Customs (HMRC) is under increasing pressure to release estimates on offshore tax avoidance by some of the wealthiest individuals in the UK. This comes after the figures were withheld in a report published during the election campaign.

Companies handed a combined £1.3bn in controversial fast-track Covid contracts with minimal scrutiny also claimed at least £1m in furlough grants, it can be revealed.

Analysis of the accounts of companies that won lucrative emergency contracts to supply personal protective equipment (PPE) to the NHS during the height of the pandemic shows 12 also claimed funds to put staff on furlough at taxpayers’ expense.

Many had no prior history of supplying PPE but received huge boosts in revenue after securing deals to supply items ranging from gowns to masks. Overall the scramble to obtain PPE resulted in the Department of Health and Social Care (DHSC) spending £9bn on personal protective equipment that was either substandard, defective, past its use-by date or dramatically overpriced.

These furlough claims were legal under the terms of the £70bn job preservation scheme, but the revelations raise questions about the ethics of claiming taxpayer support while reaping windfall gains from lucrative state contracts.

All 12 companies that claimed furlough grants had won PPE contracts via a so-called VIP lane, where approvals were fast-tracked often after a recommendation by ministers and government officials. The government spent £5bn on VIP lane contracts with 47 companies, but its use of the lane was found unlawful by the high court in last month.

The London-based fashion brand Skinnydip, which built its reputation selling designer mobile phone cases, secured a £13m contract to supply PPE in May 2020 after a referral by the former Conservative party chairman Lord Feldman.

That pushed it from a £1m loss in 2019 to a year of “record profitability” in 2020. It posted profits of £4.5m from revenues of £38m, more than double the previous year’s turnover, according to its annual report.

The company, which had 15 retail stores as of 2019, also claimed at least £500,000 in furlough grants in 2020 to ensure “that our retail colleagues, whose place of work was closed for much of the year, continued to receive a monthly income, albeit at 80% of normal salary”. HMRC records show that Skinnydip’s furlough claims continued until at least last August.

Other companies received contracts in 2020 that were worth several times their revenue for the whole of the previous year. Monarch Acoustics, a small, family-run furniture company based in Nottingham, claimed more than £200,000 in furlough grants.

It won a PPE contract worth £29m – almost three times its total revenue in 2019 – after the former health secretary Matt Hancock referred it into the VIP fast lane. The result was a 4,700% jump in pre-tax profits, from less than £300,000 to £12.6m in 2020. The company continued to make furlough claims into 2021, receiving a further £25,000 to £70,000 between January and March. It is not possible to give the exact amount of furlough payments because they are reported in ranges by HMRC.

Some of the companies that received both contracts and grants employ just a handful of people. Aventis Solutions is a Manchester-based recruitment firm that furloughed one of its three employees after winning an £18.5m contract to supply PPE via the high-priority channel.

The firm’s director, Jamie Farrell, said the employee was a recruiter whose job was no longer needed after the pandemic shut down the recruitment side of the business, which had previously supplied non-clinical staff to the NHS, among others.

He said: “Aventis Solutions Ltd has been a trusted supplier of the NHS for nine years and, during that time, has supplied PPE and other safety equipment on many occasions prior to the contract awarded by the Department of Health and Social Care.

“At a time of unprecedented global demand and when the NHS was critically short of vital PPE equipment, our company was able to provide medical-grade masks from trusted suppliers and deliver within 14 days.

“This was done at substantial financial risk to us, both as a business and personally to our company directors. There was no downpayment required from the DHSC, and at our own cost Aventis Solutions procured additional testing of all products, by an independent testing house, before delivery.

“We are proud to have assisted the NHS in this way, and to have played this small part in the UK’s response to the Covid crisis.”

Farrell added that Aventis’s prior PPE and safety equipment contracts, which numbered at least 20, had been with NHS hospital trusts, NHS provider organisations and clinical commissioning groups.

Margaret Hodge, Labour MP and a former chair of the public accounts committee, said: “On top of the scandalous way in which our taxes were spent to give contracts to chums and allies, it is astonishing that companies that had benefited from this rigged system had the gall to claim more of our money through the furlough scheme.

“The whole point of the furlough scheme was to rescue companies from bankruptcy and protect jobs, not to protect companies who had already profited massively at the taxpayer’s expense.

“This whole saga demonstrates the absurdity of Boris Johnson’s claim that he successfully managed the pandemic.”

A government spokesperson said: “Furlough provided a lifeline to more than a million businesses across the UK and protected nearly 12 million jobs – with businesses passing all the money they received from the scheme on to employees.

“We also took swift and decisive action to secure PPE to protect health and social care staff. All contracts underwent rigorous financial, commercial, legal and policy assessment.”

For some furlough-claiming companies, assessing the impact of Covid contracts on their finances is complicated by opaque corporate structures. Unispace Global Limited, a UK subsidiary of the Australian office designer Unispace, was identified by the National Audit Office as one of the biggest beneficiaries of the government’s emergency Covid scheme, having received £680m in PPE contracts after referral to the VIP lane.

The company went on to claim up to £20,000 in furlough grants in March and April 2021. However, despite DHSC contracts that show Unispace Global’s address and company number, the £680m has not appeared in the company’s revenue figures, which declined from £88m in 2019 to £64m in 2020.

A spokesperson for Unispace Global referred the Guardian to another company, Santé Group (formerly Unispace Health), saying: “Unispace cannot comment on this matter, as ownership has changed and the firm is no longer affiliated with Unispace Health in any way. Unispace, not including Unispace Health or Santé, was acquired by the private equity firm PAG in February 2021.”

Santé Group is a network of at least four companies belonging to the brothers Gareth and James Hales, the founders and former majority shareholders of Unispace. All were incorporated after the start of the pandemic.

Skinnydip, Monarch and Santé did not respond to requests for comment.

A government spokesperson said: “The government contracted with Unispace Global Ltd for the procurement of PPE and all products ordered were delivered.”