A career advice and support charity has closed and made 36 people redundant after its trading subsidiary lost a “multimillion-pound” council contract amid a legal row with the local authority. 

Steps to Work, based in Walsall in the West Midlands, is a training and development charity that has helped more than 50,000 people since it was formed in 2003.

The charity, which had an income of £23m in its latest accounts for the year to the end of March 2023, ceased trading on 27 September and entered official liquidation on 29 October, with Butcher Woods appointed as its insolvency practitioner.

The Charity Commission said it was “assessing concerns” about Steps to Work in relation to its governance and financial management.

Steps to Work had 119 employees in its latest accounts, which decreased to 36 by September after the completion of government contracts and employees were moved to other roles under transfer rules.

The remaining 36 employees were made redundant and most of them have been supported into new jobs, the charity said.

Steps to Work’s main three sources of income were restricted grant funding for community projects, government contracts to deliver specific programmes and profits from its subsidiary Starting Point Recruitment Limited.

Starting Point Recruitment is a local temp and recruitment agency which donated profits to Steps to Work.

“The trustees attribute the liquidation of Steps to Work to a combination of long-standing financial challenges, including legacy contract issues, exacerbated by the recent removal of a major contract its subsidiary had with Walsall Council which is now subject to a high court case, which had previously offset the charity’s losses,” a Starting Point Recruitment spokesperson said.

Starting Point Recruitment has provided Walsall Council with temporary workers for about 20 years and the parties entered into an agreement that included “obligations of confidentiality, non-solicitation and a commitment to act in good faith in their dealings with each other”, an SPR spokesperson said. 

Walsall Council contributed “very significantly” to SPR’s revenue, and these profits were channelled into Steps to Work, making the charity’s operations and projects viable, according to the spokesperson.

In April 2023, Walsall Council decided not to extend its agreement with SPR and instead opted to source its temporary workers from a new provider, Opus People Solutions Limited, which is owned by Suffolk County Council, the SPR spokesperson said.

“However, when the agreement with SPR came to an end in September 2023, Walsall Council solicited SPR’s workers to register with Opus, in breach of the contract between SPR and the council,” the SPR spokesperson said.

“SPR lost more than 200 workers to Opus in a very short space of time, which had a significant financial impact on its business and its ability to donate profits to Steps to Work.”

The recruitment agency said it was pursuing a claim for breach of contract against Walsall Council to recover its “multimillion-pound” losses.

Step to Work’s board said the decision to transfer workers provided by SPR to Opus People Solutions destabilised SPR and the charity financially.

The SPR spokesperson said allegations of governance or financial mismanagement are “completely unfounded and appear to be part of a campaign aimed at discrediting individuals involved in the legal case”. 

The spokesperson said SPR had received no communication from the regulator.

Asked to comment on the case, a spokesperson for Walsall Council said its contract with SPR came to end on 30 September 2023 and there were ongoing legal proceedings.