Recent research carried out by the insolvency trade body R3 into the value of the insolvency profession has revealed that the North West of England leads the way in company rescues, with more than half of all insolvent businesses surviving in some form.
The report, entitled Why Insolvency Matters, found that of 2,391 businesses to enter into insolvency in the region, 1,243 were rescued, helping to save 34,786 jobs that would have been lost if a company liquidation had taken place. This company rescue rate of 52 percent is well above the national survival rate of 41 percent.
These figures do not take into account those companies who contacted turnaround practitioners for advice and managed to rescue their business without having to enter into a formal insolvency procedure, such as a company voluntary arrangement (CVA), administration, pre-pack administration or a liquidation. Currently around a fifth (22 percent) of the work of a turnaround practitioner involves general or pre-insolvency advice.
Why Insolvency Matters
The report was produced following research from ComRes, commissioned by R3, which surveyed 448 insolvency practitioners across the UK. There are currently 180 insolvency practitioners operating in the North West, with approximately 1,750 in the UK in total.
The report Why Insolvency Matters: The Insolvency Profession’s Value to the North West, was launched by R3’s national president, Phillip Sykes. He said: “The North West is one of the biggest centres for our profession, with over 10 percent of the UK’s insolvency practitioners based here. The region also has the best record on company rescue of any part of the UK, resulting in thousands of jobs saved and wider benefits for the regional economy.
“The business community here is supportive of one another and this can encourage a more proactive approach in seeking professional advice for financial problems at an early stage. The figures demonstrate the importance of tackling the problems of struggling businesses early on.”
Company Rescue dos and don’ts
As well as seeking professional advice at your earliest opportunity, there are a number of other ways you can increase your options and improve your business’ chances of making a complete recovery.
- Do – Keep creditors informed about your situation
- Do – Have a firm grasp of your cashflow situation and the bills that need to be paid
- Do – Stop making payments to creditors until a clear plan of action is in place
- Do – Take notes on all the important decisions that are made
- Do – Act fast. Burying your head in the sand will only make the situation worse
- Don’t – Ignore legal threats you receive or statutory demands for payment
- Don’t – Choose to pay off one creditor over another simply because they are making the most ‘noise’
- Don’t – Assume that the situation will resolve itself
- Don’t – Make promises to creditors you might not be able to keep
- Don’t – Take any deposits for jobs you may not be able to complete
The importance of an effective insolvency regime
The UK’s turnaround practitioners have a fundamental part to play in the business cycle, helping to save jobs and ensure that the talents, assets and ideas in the UK’s businesses are put to productive use, while ensuring creditors are repaid wherever possible.
This report about the impact of the insolvency profession in the North West shows just how important it is to have an effective insolvency regime in place to pick up the pieces when businesses fail, and help them to avoid insolvency in the first instance.
Contact us for help
If your business is starting to suffer from cashflow problems and you’d like some general, pre-insolvency advice, please get in touch with our team today on 08000 746 757. Alternatively, if matters have taken a turn for the worse and you believe your company to be insolvent, we can put the provisions in place to resolve your situation quickly and safely.
Written by: Mike Smith