Bell Pottinger's British business folds after South Africa scandal

By Kate Holton

LONDON (Reuters) - Bell Pottinger's British arm collapsed on Tuesday after the global public relations agency's clients deserted it over a racially-charged political campaign it ran in South Africa.

After working behind the scenes on some of the most defining moments in recent history, from the election of Margaret Thatcher to the death of Russian spy Alexander Litvinenko, Bell Pottinger crumpled following a scandal of its own making.

It entered a tailspin earlier this month after it was thrown out of an industry body for running a campaign in support of South African President Jacob Zuma, funded by the influential Gupta family, that sought to stir racial tension.

Bell Pottinger, which is based in London, has lost customers, partners and its second-biggest shareholder in recent weeks, prompting the UK company to be put into administration -- a form of creditor protection -- after failing to find a buyer.

"Following an immediate assessment of the financial position, the administrators have made a number of redundancies," accountants BDO said on Tuesday.

"The administrators are now working with the remaining partners and employees to seek an orderly transfer of Bell Pottinger's clients to other firms in order to protect and realise value for creditors," BDO added.

NO OPTION AFTER LOSSES

Bell Pottinger apologised in July this year after an email published in South African media showed it had sought to stress the continued "existence of economic apartheid".

With the inflammatory slogan "white monopoly capital" running on a Gupta-owned television channel, the country's main opposition party, the Democratic Alliance, complained that Bell Pottinger was seeking to "divide and conquer" the public.

The outcry led to the resignation of Bell Pottinger CEO James Henderson, also its biggest shareholder, while its second-biggest investor wrote off its stake. Clients such as global bank HSBC publicly distanced themselves from the firm.

BDO said none of Bell Pottinger's subsidiaries outside the UK were in administration, and would continue to trade under the control of their separate management teams.

"Bell Pottinger has been heavily financially impacted by the well-publicised issues," BDO said.

"Late last week, the level of those losses, compounded by the inability of the business to win new clients, was such that remaining management were left with no option but to commence the process to place all UK Bell Pottinger entities into administration," it added.

(Reporting by Kate Holton; editing by Alexander Smith)