Ex-Tory Treasurer and major party donor handed lucrative government contract to advise the Post Office

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A company run by a major Tory donor and former party treasurer was handed lucrative government contracts to advise the Post Office, The Independent can reveal.

Malik Karim, who has given the Conservatives £1.6m since 2014, won two major deals last year through his finance firm Fenchurch Advisory, which were worth £1.5m and £175,000 respectively.

Documents uncovered by this publication show Fenchurch was handed the payments to offer the beleaguered Post Office “advice on banking services and the retail banking market”.

Critics complained that the contracts “smack of cronyism” and raised questions about how government contracts are awarded.

The revelation comes as the Conservatives remain embroiled in a row involving the party’s biggest donor, Frank Hester, who allegedly said MP Diane Abbott made him “want to hate all Black women” and that she “should be shot”.

The comments by Mr Hester, who has donated £10m to the Tories and whose company has won more than £400m of NHS and prison contracts in the last eight years, were labelled “racist and wrong”, but the Conservatives have refused to return the money.

Rishi Sunak was also caught up in a row for handing a knighthood to a major Tory donor who gave £5m to the Conservative Party last year.

Businessman Mohamed Mansour, who is a senior treasurer at the party and a former Egyptian government minister, was knighted for business, charity and political service.

Mr Karim’s Fenchurch contracts were awarded while the Post Office was grappling with the growing fallout of the Horizon IT scandal and warning of the risk of branch closures due to spiralling costs.

Weeks later, the government ruled that every wrongly convicted sub-postmaster would be given the option of receiving £600,000 in compensation or pursuing a formal claim for more.

But despite being under considerable financial pressure, the Post Office brought in Fenchurch Advisory for five months to advise on the retail banking market – meaning it was paid around £336,000 per month for the work.

The awarding of the contract by the Post Office, which is owned and controlled by the department for business, raises questions about Mr Karim’s access to Conservative ministers and whether it represented value for money.

Labour peer Prem Sikka told The Independent the award should be investigated by the National Audit Office (NAO) to ensure the contract provided value for money for taxpayers.

“The question that arises is what this guy was offering that others were not, and how do we know taxpayers were getting value for money?” he said.

“Clearly, with a donor getting the contract, there should be extra transparency because inevitably it smacks of cronyism.

“The NAO should look at whether taxpayers got value for money. Inevitably there is a conflict of interest, so the government must publish minutes of meetings and correspondence relating to this contract, and the NAO should investigate whether it was value for money.

“It is not the first time the government has handed out lucrative contracts to Tory donors.”

The Communications Workers Union said it was “ominous” that the contract was awarded in the midst of the Horizon IT scandal.

General secretary Dave Ward said: “The awarding of this contract should raise serious questions about proper process.

“At a time when the Horizon scandal has eroded public trust in the Post Office, it is ominous that such a lucrative contract has been awarded to a senior Tory activist and bankroller.”

Mr Karim has been lauded as one of the most successful Muslim businessmen in the City, having come to Britain in 1974 aged 12 as a refugee from Uganda.

He studied economics at the University of Manchester before launching a career in finance in the 1980s, setting up Fenchurch in 2004.

The 62-year-old father of two was made co-treasurer of the Conservative Party, a powerful position in its organisational structure, in October 2021, serving for around a year.

He has earned more than £70m since setting up the discreet investment bank and, of this, has donated £1.6m to the Conservative Party since 2014. Much of the money was handed over during this parliament.

Mr Karim sold a controlling stake in Fenchurch to French bank Natixis in 2020, but remains the firm’s chief executive.

The major Tory donor has courted controversy in the past, including through his membership of Ingenious Film Partners 2 between 2006 and 2011, an investment scheme accused of being a way of avoiding tax by HMRC.

His firm advised on the controversial attempted takeover of mutual insurer LV by a US private equity firm, which was thwarted after a campaign against the £530m deal.

Labour MP Clive Lewis told The Independent the awarding of contracts to Tory donors is “just so commonplace now”. He added: “Something turned during Covid, since the VIP lanes, but it just feels like standard practice now for this government.

“Nobody knows what conversations are going on, but you give a donation and you get a contract… but the public aren’t stupid, they can see what is going on.

“If you were the international development department of another country looking at how to give money to Britain, all the dashboards would be flashing for state-level corruption.

“There is a lot of work for Labour to do if we form the next government to rebuild trust.”

Mr Lewis blamed the repeated awarding of contracts to Conservative donors on the “mass outsourcing of every sphere of public life”.

Allies of Mr Karim stressed that Fenchurch began working with the Post Office in 2018, before he was the treasurer of the Conservative Party. His firm advised the body on a partnership with the Bank of Ireland, allowing it to offer Post Office-branded savings, mortgage and personal loan products.

Fenchurch Advisory told The Independent: “Fenchurch began working with the Post Office in 2018 after a competitive selection process. We completed the first stage of the work to the Post Office’s satisfaction and the second stage was completed recently.

“The initial engagement predated Mr Karim’s appointment as Conservative Party treasurer in mid-2021.”

However, records show Mr Karim began donating to the Conservative Party in 2014, when he gave the party £25,000.

The Post Office said it followed public procurement rules in its work with Mr Karim and Fenchurch. A spokesperson said: “Fenchurch Advisory were engaged on the basis of their expertise as a financial services advisory firm.

“Post Office’s retail banking services include highly complex arrangements that require specialist expertise to ensure the services we offer deliver the best for our customers and postmasters.»

Mr Sunak has faced further scrutiny since the outcry over Mr Hester’s comments. The prime minister and other top Tories refused to rule out accepting further donations from the tycoon.

As well as the £10m donation in the past year, the Conservatives are reportedly sitting on another £5m donation from Mr Hester, which ministers have refused to confirm or deny. Mr Hester has apologised for the comments, which he described as “rude”.

The Department for Business and Trade declined to comment.