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Richard Branson addresses criticism in an open letter to Virgin Group employees

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Sir Richard Branson published an open letter to Virgin Group employees yesterday, in part to address some of the criticism he has received – including in our comments – over issues including his liquid (as opposed to asset) wealth and his tax status.

It includes a commitment to raise funds against Necker Island, if possible, to inject into Virgin Group companies.

The timing was unfortunate, as it includes a paragraph on Virgin Australia which slid into administration shortly after publication.

As we covered on Saturday, the UK Government is believed to have rejected Virgin Atlantic’s first bid for a rescue loan on the grounds that it had not sufficiently exhausted the resources of its shareholders (Virgin Group and Delta Air Lines) and that its business plan to repay the money was too optimistic.

I have included extracts below.  The full letter can be found here.

For clarity, the bolding and images were added by me.  Outgoing links have been removed but can be found in the original.

Over the five decades I have been in business, this is the most challenging time we have ever faced. It is hard to find the words to convey what a devastating impact this pandemic continues to have on so many communities, businesses and people around the world. From a business perspective, the damage to many is unprecedented and the length of the disruption remains worryingly unknown.

Together with our Virgin company teams, I am working day and night to look after our people and protect as many jobs as possible. We are operating in many of the hardest hit sectors, including aviation, leisure, hotels and cruises, and we have more than 70,000 people in 35 countries working in Virgin companies. We’re doing all we can to keep those businesses afloat and I am so thankful to all of you who have continued to work so hard in these difficult times. We have already committed a quarter of a billion dollars to help our businesses and protect jobs, and will continue to invest all we can. 

I’ve seen lots of comments about my net worth – but that is calculated on the value of Virgin businesses around the world before this crisis, not sitting as cash in a bank account ready to withdraw. Over the years significant profits have never been taken out of the Virgin Group, instead they have been reinvested in building businesses that create value and opportunities. The challenge right now is that there is no money coming in and lots going out.

My passion has always been creating businesses that improve people’s lives and over the years we have created hundreds of thousands of jobs. Today, the cash we have in the Virgin Group and my personal wealth is being invested across many companies around the world to protect as many jobs as possible, with a big part of that going to Virgin Atlantic.

Much has been said about Virgin Atlantic employees taking a wage reduction for eight weeks, spread across six and a half months. This was a virtually unanimous decision made by Virgin Atlantic employees and their unions who collectively chose to do this to save as many jobs as possible – it was not forced upon them by management.

I am so proud of the Virgin Atlantic teams who continue to deliver critical medical cargo flights to the UK, and the many Virgin Atlantic people who are currently volunteering with the NHS. Their spirit is so heart-warming and inspiring, and I couldn’t be prouder of our amazing people (it deserves saying twice!) I am also deeply moved by the thousands of messages of support from our incredible people at Virgin Atlantic and around the Virgin family. They mean so much to me – thank you all.

Together with the team at Virgin Atlantic, we will do everything we can to keep the airline going – but we will need government support to achieve that in the face of the severe uncertainty surrounding travel today and not knowing how long the planes will be grounded for. This would be in the form of a commercial loan – it wouldn’t be free money and the airline would pay it back (as easyJet will do for the £600m loan the government recently gave them).

The reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it. Without it there won’t be any competition left and hundreds of thousands more jobs will be lost, along with critical connectivity and huge economic value. Virgin Atlantic started with one plane 36 years ago. Over those years it has created real competition for British Airways, which must remain fierce for the benefit of our wonderful customers and the public at large.

The same is true in Australia, where the brilliant Virgin Australia team is fighting to survive and need support to get through this catastrophic global crisis. We are hopeful that Virgin Australia can emerge stronger than ever, as a more sustainable, financially viable airline. If Virgin Australia disappears, Qantas would effectively have a monopoly of the Australian skies. We all know what that would lead to.

At this time of crisis, we also have thousands of brave frontline employees working for Virgin Care as part of the NHS under extremely challenging circumstances. First and foremost, I want to thank you all for your dedication and resilience. It is humbling to see all the incredible work you are doing providing much needed NHS services, in particular those of you who are helping and giving dignity to people with severe COVID-19 cases. We have invested more than £75m to date into the NHS and have never made a profit. If Virgin Care ever does make a profit, we have committed to reinvest 100 per cent of that back into the NHS.

Much has been written about Virgin Care’s dispute with a commission over a contract a number of years ago. Some will say it was unwise for Virgin Care to do this, but the most important thing is that Virgin Care was never intending to profit from it and 100 per cent of the money awarded went straight back into the NHS.

Virgin Money Giving, our non-profit fundraising platform, has also received criticism for the fees they took when processing a donation to charity. Virgin Money Giving never makes a profit and never will. Virgin Money Giving was founded in 2009 when Virgin Money began sponsoring the London Marathon. At the time, one player dominated the online fundraising industry. In a sector where the entire purpose is to make the most of the money raised for good causes, it operated with a for-profit business model.

Virgin Money wanted to disrupt this market by providing a not-for-profit alternative that challenged the status quo. Virgin Money Giving was able to offer the same service with just a two per cent fee (to cover overhead costs, which Virgin Money are now generously stepping in to cover completely for all charities). Virgin Money Giving has supported more than 1.3 million fundraisers, raising over £800 million for good causes – all without making any profit whatsoever. Tens of millions more have gone directly to good causes due to people donating through Virgin Money Giving rather than for-profit platforms.

There have been comments about my home. Joan and I did not leave Britain for tax reasons but for our love of the beautiful British Virgin Islands and in particular Necker Island, which I bought when I was 29 years old, as an uninhabited island on the edges of the BVI. Over time, we built our family home here. The rest of the island is run as a business, which employs 175 people. As with other Virgin assets, our team will raise as much money against the island as possible to save as many jobs as possible around the Group.

I have been honoured to work with all of you over the last five decades building companies and creating competition and choice for consumers across a whole range of industries. Our companies have created hundreds of thousands of jobs and paid hundreds of millions in tax around the world (and will continue to do so). Our companies based in the UK pay tax in the UK, and so forth.

You can read the full version here.

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Comments (215)

  • Relaxo says:

    Wow people really dislike this dude. I wonder if patients refuse services commissioned to Virgin Healthcare because Goatee owns it. Personally, I thought it was a good letter which mostly stuck to the facts. Yes you dont get to be a billionaire without dodging taxes & maximising loopholes, but he’s a far cry from psychopaths like Bezos, Koch, Ambani et al

    • AJA says:

      @Relaxo, it was however tone deaf and PR spin. “We have invested a quarter of a billion dollars to our businesses” sounds a lot more than 250 million. And remember that “investment” wasn’t entirely in the airline.

      Personally I have no axe to grind as i have never flown on Virgin nor do I have any of the financial products. I think it would be a shame to see the airline collapse but I am not convinced SRB has shown enough contrition in this letter, let alone sunk enough of his fortune he has made out of the “loss making” (and he lists a few) back into the businesses he is the figurehead of.

      His comment that Easyjet received 600m is sour grapes, it’s saying they got it why not me?

      Capitalism works precisely because companies might fail. That’s why they are so entrepreneurial and focussed on profit. I do wonder if Virgin Atlantic really is a profitable airline or has it been kept going because other airlines (Singapore before Delta) could see it as a useful tool to compete against BA and LH?

      Finally since SRB stated that the move to Necker Island was not tax motivated, perhaps he’d like to invest a sum equal to the UK tax he hasn’t paid in all the years he’s been “exiled” into “his” airline as a condition before receiving a state loan? I wonder what that figure adds up to?

      • J says:

        Where does this “capitalism” you speak of exist in the airline world? The US airlines have taken a huge bail out. In Europe Lufthansa, KLM, Air France, Finnair, Alitalia etc all getting by on government money. The ME3 are effectively stated owned. BA get a lot of their strength from being a former state owned monopoly. This is not a sector which represents free market capitalism in action (largely because most countries see economic benefit and/or vanity in having an airline). Sure there’s some LCC exceptions like Ryanair but they are exceptions right now.

        • AJA says:

          KLM, Air France, Finnair and Alitalia are all at least partially owned by their respective governments. It seems sensible for their governments to bail them out as a shareholder. As you say the ME3 are effectively state owned.

          Lufthansa is the odd one out but they are effectively the only major legacy carrier in Germany and were once state owned so it seems obvious that their government would step in. They didn’t in the case of Air Berlin or Deutsche BA but did offer assistance to prop up Condor when Thomas Cook failed.

          So perhaps SRB and Delta would be happy to dilute their shareholdings and allow the UK government to buy into the business? The trouble is that then gives BA a point to use against Virgin in the future unless they too dilute existing shareholdings in exchange for a government stake, something BA is not keen on doing.

  • Freddy says:

    Can’t he pop down to NatWest and remortgage his island for a cash injection

  • Steve R says:

    Nat West makes sense – we bailed that out

    • Ken says:

      And the shareholders took a massive hit and the government took a huge stake in the business.
      Whatever the rights and wrongs of that bailout there was a clear idea that if a large bank failed the damage to the economy would be catastrophic.

      No one wants to see Virgin fold, but there will be far more demands for bailouts. The taxpayer can’t save them all – particularly if the owners won’t pony up some money or assets.

      The car industry will be soon lining up with their begging bowl and have the double whammy of Brexit. A far bigger economic impact when a car plant closes.

      Should we bail out Topshop (and the rest of the Arcadia) group owned by Philip Green ?

      • Lady London says:

        Agree with you on keeping the car plants @Ken.

        I had a contract lined up with a very big supplier to worldwide car industry in November. It got pulled because they lost the budget as their major customers Daimler-Benz (Mercedes) and BMW are finally having to make 10’s of thousands of people redundant in the face of subsidised competition.

        If those German companies finally have to do this with their highly protective labour laws then the industry and it’s supply chain has a better case for support than a few rich jobs that fly around in airplanes.

    • C F Frost says:

      Virgin Money could do him a mortgage…

  • SammyJ says:

    I was hoping for some info about what’s happened to Norwegian, struggling to get my head around what parts have gone bankrupt and whether it’s the end of the whole thing for them?

    • Rhys says:

      Norwegian outsources its pilot and crew to subsidiary companies. It severed contracts with these companies earlier and they have gone bankrupt (obviously – single source of income dried up!) The airline itself got a bailout from the Norwegian government last month but it’s an ongoing situation. If Norwegian survives it will likely be a very different company than the one that it was before.

      • SammyJ says:

        Thanks Rhys, that’s a bit clearer.
        Their press release it also says this bit, which made me wonder if it was all crewing in these locations…

        “Due to the extraordinary situation (force majeure), Norwegian has also notified OSM Aviation that it has cancelled the crew provision agreements with several of its jointly owned OSM Aviation subsidiaries. These companies have crew based in Spain, UK, Finland, Sweden and the US.”

        • Lady London says:

          Why did France and Italy employees survive when the contract with their equivalents in other countries were severed?

          I am very curious about which legal and/or tax advantages this weird structure of non direct employment had. Does anyone know?

      • insider says:

        and to be clear, the bailout was more of a very short finance bridge – in order to unlock the bigger part of the bailout, they need to restructure their debt / equity position. They’re asking bondholders to convert into equity, which will wipe out a large chunk of their value – key date will be the 30th I think, when the bondholders will vote to either accept or reject the proposal

      • @mkcol says:

        So does this in essence mean Norwegian (airlines) crew employed by OSM no longer have a job?

        • insider says:

          From what I have read, they are still employed (and furloughed) by OSM, but the contract with Norwegian has been terminated. They have said that if and when this is all over and Norwegian have sorted themselves out, they would be happy to re-contract with them and supply pilots. But yes, I suspect there are a number of pilots who don’t have a realistic end game here

  • C F Frost says:

    Goatee & Co suffer the accusation of being disingenuous because their communications are disingenuous.

    Virgin Care is registered in the UK, although its ultimate holding company is registered in the British Virgin Islands. It has never paid any corporation tax. RB is clear that it makes no profit, hence no tax, and my guess is that is all about how one defines profit and and where it come from because by my reading, the liability VC did have did have for corporation tax was wiped out by losses made in the other companies in the group.

    All of this might, arguably, give Virgin Care a certain advantage in NHS procurement.

    Perhaps then one should be encouraged that the Government has unveiled a £1.3bn scheme to help start-ups and let tax avoiders fail. What goes around comes around, no?

    And besides, all this talk of a BA monopoly. Given the brilliant shrinkage we’ll surely see in domestic flights, the marketplace will remain competitive with US and ME airlines all in play
    on all routes.

    • J says:

      Not really, US and ME airlines will usually only be able to fly directly to the US and ME.

    • Ken says:

      The tax avoidance techniques are well documented.

      Transfer costs to the tax haven if your choice via

      1) Royalties
      2) Borrowing costs
      3) Management charges
      4) Transfer pricing.

      These are just the vanilla ones.

      Who needs UK dividends paid out of taxable profits when you can move profits about.

      It’s like whack-a-mole trying to get these companies to pay their tax.

    • Callum says:

      He’s specifically stated that all money gets reinvested back into NHS services.

      I don’t see how they could be making “secret profits” without those statements being a lie. Though I’d love to see some evidence as opposed to your hunch – especially as you hardly seem neutral.

  • Mikeact says:

    The news overnight that Virgin Australia have gone into liquidation, probably does not bode well for the Virgin brand, and I guess there are many similarities between the UK and Australian brand, for the downfall. I’d point the finger at questionable management in the first instance.
    Those with a ton of Velocity points must be quaking in their boots, albeit that that part of the business is probably worth a lot to Virgin.

  • Phillip says:

    I’d like to see Delta do their bit and support rather than just reap when it suits and stand back when it matters!

    • J says:

      That would effectively be the US taxpayer supporting Virgin, I don’t think it is possible? They also own a minority stake.

      • AJA says:

        But it’s a significant minority stake. It’s “only” 49% because EU rules state that non EU companies can only own a maximum of 49% of EU airlines plus SRB still only owns as much as he does even though he would happily offload more if he could. He really wanted AF/KLM to take up their 31% stake that they wisely declined to do.

        • Mikeact says:

          Actually, I read that it was Branson that pulled the plug on KL/AF, not the other way round. I guess he could be kicking himself now.

      • Phillip says:

        They are 49% responsible for the airline whichever way you look at it. How are they taking that 49% responsibility? Had AF-KLM acquired their stake, who then should be expected to save the airline?

      • Mikeact says:

        So it’s OK for HMG to support a US company that owns virtually half (49%) of a UK company?

    • insider says:

      given the US government aid to the US airlines, I’d be surprised if there wasn’t a clause in there somewhere preventing them just transferring the money to a foreign minority stake

      • Sean says:

        In which case the only sensible thing to do (if they want to save them) is to dilute to a miniscule amount delta and beardy’s holdings. If both aren’t prepared (or able) to pump money in its tough if they want rescuing..

        • mr_jetlag says:

          Yes this is spot on. Swap all existing debt to equity and issue new bonds also convertible to equity. Avoids the moral hazard issue while providing cash for survival. That’s assuming anyone can see a role for VS in a world with long haul leisure travel 90% reduced.

          • Rob says:

            I don’t see that. If people CAN travel, they will. It’s the British way. Obviously unemployment (and potentially travel insurance issues) will mean that many have to forego holidays entirely, but given that overseas holidays are generally cheaper and warmer than British ones, little will change. It’s not as if other countries are riskier than the UK. Countries might not want to let you in of course but that is a different matter.

            The luxury end may hold up better – a huge hotel with just 100 rooms, able to serve everyone room service breakfast and spread dinner across a number of spaces, can adapt better than a small hotel with 300 rooms.

          • mr_jetlag says:

            Rob, surely that’s partly out of our control – as much as I would love to decamp to St Lucia or Japan if they are banning international arrivals or imposing quarantines it doesn’t matter what I want…

            I mentioned long haul specifically as European travel will settle back to something close to normal soon, but with everyone saying a vaccine is 18mos away any long haul leisure travel will suffer. OK 90% is an exaggeration but I would have thought 40-50% drop till 2022 is realistic.

          • Rob says:

            It wouldn’t be surprising, I agree. But who knows? For a start, strip out the cruise market and those who travel a lot are generally at the lower end of the age-based risk scale. I imagine a lot of those in the ‘underlying conditions’ segment also minimise travel due to insurance issues. These younger, healthier people are more likely to want to travel.

            But, yes, you can’t avoid quarantine etc if it is there.

            I’m coming round to the idea that the vaccine won’t be the answer. The answer, which will come more quickly, is a drug which aids recovery and makes the prospect of getting ill less threatening. And at some point we have to start the debate about the risks of giving an untested vaccine to an entire population. If it had side effects, which would not be apparent given the quick approval process, it would be too late. We may end up, for example, not giving it to under 30s on the basis that the risk / reward trade off is too high.

  • stupoo says:

    Is it any different to the cruise ships? The cruise businesses all fly minor island flags to minimize their tax bills, relax labor laws and work people long hrs on low pay. No bail outs (from any government practically) are forth coming for them … they are effectively stateless entities.

    Virgin is not the same but it is at risk of being in a similar boat albeit maybe that it was creating competition that otherwise didn’t naturally exist to the benefit of consumers.

    Think the problem here is that you can’t have it both ways.

    Either you structure yourself/company to pay a “fair” amount of tax into the UK coffers, and in return you might be close to the top of the queue for a bailout (if there is on the cards – no guarantee) or you don’t … and then you get a bailout.

    Maybe I am looking at this the wrong way round? Maybe the government should formalize a bailout guarantee in return for paying tax?

    “No Taxation without Bailoutification??”

    • Rhys says:

      But unlike those cruise companies, Virgin Atlantic is an airline headquartered in the UK so it pays UK corporation tax. I think the criticism is levelled at Branson, rather than VS.

      • Ken says:

        It would be more correct to say it’s liable to UK corporation tax.

        As it doesn’t make a profit, it doesn’t pay corporation tax.

        • stupoo says:

          Don’t disagree with Rhys.

          But think this is getting back to the crux of it. If you haven’t paid in to UK Plc .. you can’t expect to take out.

        • insider says:

          and to be fair, it does pay a lot of tax in the UK – APD, payroll taxes etc. VS is undoubtedly a positive for the UK in that respect, but the government have to draw a line somewhere as to how many businesses they keep afloat vs the cost of doing that. I doubt that the government are thinking about the benefits of competition right now over the benefits of not having to spend a load of money!

          Unfortunately for Branson, it’s the smaller things that have tarnished his image, whether or not they are true. People like to bash a billionaire, and he hasn’t helped himself…

          • Ken says:

            That is a fair point. However the vast majority of taxes that business ‘pay’ are actually what they collect on behalf of HMRC and are actually paid by the employees or customers.
            Examples are APD, VAT, PAYE, and EE’s NI.

          • John says:

            Who ultimately “pays” a tax depends on the elasticity of supply and demand. The burden of VAT is on average roughly split 2/3rds on the merchant/service provider and 1/3rd on the consumer. I believe APD is paid by airlines as they wouldn’t lower overall fares even if APD is cut.

          • Rob says:

            Am I being dim here? Sure price elasticity does not apply as a concept with VAT. I accept that if VAT goes up then I may spend less on clothing. However, I will still spend my remaining money, and whatever else I buy will also have VAT on it.

            eg if I have £100 spare per week and buy 10 tshirts, but tshirt prices double and I can now only buy 5, the amount of VAT I pay is identical.

            What would have a major impact on VAT is price inflation on non-VATable categories such as food. Clearly if food prices shoot up then I have less money left to buy things which do incur VAT.

        • J says:

          They were profitable until 2017 and were on track to make a profit. But feel free to keep lying because you don’t like Beardie.

          • J says:

            This @Ken

          • marcw says:

            Stop providing fake information. In the last 10 years, VS has had more year with loses than profits. Cumulative, it´s in the red. Hardly difficult to say they were profitable (unless your definition of profitability only looks at 2015-16).
            images.cdn.centreforaviation.com/stories/2014/May/22a/VA3.PNG
            images.cdn.centreforaviation.com/stories/2019/Apr/17/v2.JPG

          • Ken says:

            Perhaps your could just state the cumulative operating profits or pre-tax profits for Virgin Atlantic between 2010 and 2019. That would be really helpful.

            Instead you just keep posting the lie that they were profitable until 2017.
            They weren’t.

          • Mikeact says:

            @J Why would you say that ?

        • Sean says:

          despite not making a profit Beardy still gets his “Brand” payments – which in turn reduces corp tax and the payments all go offshore – handy eh? Although he’s not alone in this methodology – eg apple, facebook amazon etc

          • Lady London says:

            I’d go after Amazon sooner than Virgin. A court just ordered them to meet standards of protection for Amazon employees that Amazon was not meeting.

            As from the following day after that judgment from the court, Amazon promptly closed all of its facilities in that country.

            I did see something about Amazon UK helping the government out with logistics for supplies for the epidemic. Not sure if true. But if so there would surely be a quid pro quo in not pursuing Amazon for employee work conditiond breaches or tax. Which it’s time someone did.

          • JRC says:

            Unfortunately Lady London you are very wrong. Amazon shut down French warehouses due to being fined 1M Euro per day if they ship a non essential product per the French govt definition of essential. Unfortunately the definition of essential product varies on a case by case basis. Who is to say a young family struggling with young children in a small apartment wants to order some board games to keep them entertained. Per the French govt, that is a non essential product. To that individual family it could be the complete opposite. Given Amazon sell hundreds of millions of products it was impossible to prevent this so they decided the risk was too high and closed the warehouses. They are trying to get the decision overturned as it’s clearly non-sensical.

          • Lady London says:

            My info came from 60 millions and one other source that it was about employee protection. Other online businesses are still able to deliver. Mixed businesses (essential and nonessential) are still supplying in retail apparently.

          • Josh says:

            Don’t the French consider chocolate and cheese “essential”

          • Lady London says:

            @JRC thanks. Hadn’t seen that coverage but looks like we’re both right.