Value and adverse press comment regarding the UK Insolvency Industry

14 DEC 2009

The Times has published an interesting piece entitled "Advisers rake in £3bn from Lehman Brothers, Woolworths and other failed firms." The article makes interesting reading. Perhaps of more relevance though are the reader comments. At least one Insolvency Practitioner (IP) seems to have entered the fray. The Financial Times has also reported on a similar issue but with particular emphasis on Begbies Traynor.

One counter argument to these accusations of profiteering, and allegations of fat cat behaviour, could be to focus on the value that the insolvency industry brings to the UK economy in rescuing viable businesses. In terms of the value of the insolvency industry it is important to consider evidence. The Association of Business Recovery Professionals (R3) commissioned some independent research by the Centre for Economics and Business Research Ltd (not to be confused with Cambridge University's Centre for Business Research) in 2008 into the insolvency industry. The R3 research noted that the UK insolvency industry:

"employs 12,700 people directly, including 1,744 licensed insolvency practitioners, in 714 firms

  • makes a direct contribution to national GDP of £780 million annually — plus an extra £230 million indirect contribution through employees’ spending and purchases from suppliers
  • provides assistance to businesses with a combined turnover of £132 billion each year
  • helps to save 910,000 jobs annually in businesses that are suffering from solvency problems
  • is ranked ninth out of 127 countries for speed with which it deals with troubled businesses and tenth out of 175 countries for the amount it recovers for creditors
  • plays a vital role in maintaining a business environment in which creditors are willing to lend, entrepreneurship is encouraged and the economy can flourish.

Our research demonstrates that jurisdictions, like the United Kingdom, that treat creditors appropriately in times of business difficulties are the most likely to be prosperous in the longer-term."

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