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General Election 2017: Insolvency and restructuring policy priorities for the next government

With the opinion polls pointing to a Conservative victory at next month’s general election, Theresa May looks set to secure her return to Downing Street as the head of a government with a sizeable parliamentary majority behind her.

The challenges facing the new government will be substantial. May has already set out some initial thinking on the considerable tasks for her government: securing a “good deal from Brexit”, increasing productivity and dealing with the rising cost of social care.

But with inflation starting to rise, Q1 2017 insolvency numbers picking up in England and Wales and rising over 2016-17 in Scotland (see our comments on the latest statistics here and here), as well as the continuing uncertainty over the outcome of the Brexit negotiations, it is vitally important that the government ensures that the key underlying strengths of the UK economy are reinforced and enhanced.

The UK’s insolvency and restructuring framework is one of those key strengths. It returns money to creditors quicker and at a lower cost than counterpart frameworks in the US, Germany and France. In 2013-14, the insolvency and restructuring profession rescued more than 41% of insolvent businesses with which it worked and saved more than 235,000 jobs. The profession also:

  • Encourages both domestic and cross border investment by increasing the overall efficiency and attractiveness of the UK as a place ‘to do business’;
  • Encourages the timely restructuring of viable companies in financial difficulties, saving jobs and helping companies survive;
  • Encourages entrepreneurship and discourages bad behaviour;
  • Improves access to credit.

Should Theresa May secure a large parliamentary majority, the new government will have the opportunity to implement policies which could help to ensure that the UK economy is equipped to cope with any challenges that might arise over the coming  years. R3 would like to see the new government commit to a number of policies which will ensure that the UK’s insolvency and restructuring framework remains one of the best in the world, and continues to play a key role in supporting the efficient running of the wider economy in the years ahead.

1.       Corporate insolvency framework

R3 would like the new government to move ahead with its proposals for reform of the UK’s corporate insolvency framework. The government’s consultation in May 2016 outlined four proposals for reform, with the objective of ensuring ‘that the insolvency framework supports business rescue where possible, maximising returns to creditors where possible.’

R3 welcomed the government’s focus on restructuring tools and business rescue, given the rise in restructuring and advisory activity over the last decade – although R3 did have some concerns about the specific proposals (see our previous R3 Thinks post here) which were shared by the business community. Since the consultation was launched, the government has only published a summary of responses – with the process of Brexit negotiations now formally underway, we are keen that the incoming government pushes ahead with these reforms, taking into account the concerns expressed by R3 and others, so that the corporate insolvency framework is fully equipped to support struggling UK businesses in the years ahead.

Looking more widely, with the EU bringing forward a new ‘Insolvency, Restructuring and Second Chance’ Directive (which in light of Brexit may not apply to the UK) and other countries around the world looking to bolster their own restructuring frameworks – Singapore in particular is seeking to become the international centre for insolvency and restructuring – it is vital that the UK keeps its corporate insolvency framework up to date and competitive in the global market for restructuring services.

2.       Brexit and mutual recognition

R3 has called on the government to ensure that the benefits of the EU Regulation on Insolvency and the Recast Brussels Regulation are preserved in negotiations via an equivalent treaty between the UK and the EU.

As the Brexit negotiations proceed over the next two years, we would encourage the government to protect the UK’s reputation as an attractive place to do business by preserving the benefits of these two important insolvency-related EU regulations. These regulations allow automatic recognition of UK insolvency procedures and judgments across the EU and form a vital part of the UK’s strong, world class insolvency and restructuring environment. If the benefits of these regulations are not preserved, jobs, growth, inward investment and productivity will be harmed and the cost of borrowing is likely to increase. The UK’s position as a centre for international restructuring and insolvency work would also be undermined.

3.       Seeking debt advice from appropriately qualified professionals early enough

The government has already confirmed its commitment, through its new Industrial Strategy, to help businesses to start and scale up. As part of the government’s aims to ensure that more businesses can access the finance and management skills they need to grow and succeed, R3 encourages the government to work closely with the insolvency and restructuring profession to ensure that businesses in financial trouble seek advice as early as possible, to give them the best possible chance of long term survival.

As part of that work, more should also be done to encourage financially distressed businesses to seek advice from properly qualified advisers. Unfortunately, not all of the organisations which offer advice to troubled companies are reputable, licensed or regulated. As the trade body for insolvency and restructuring professionals – whose members are regulated by professional bodies, bound by legal duties and professional rules, and are required to pass a series of exams before being licensed – we are keen to do what we can to promote the importance of professional and regulated debt advice to businesses in financial trouble.

There are a number of other issues that R3 is keen for the new government to address over the next parliamentary term:

  • Resolving the conflict between employment and insolvency law in collective redundancies to better protect taxpayer money and ensure viable businesses can be rescued;
  • Working with HMRC to improve communication between the profession and the department to ensure that viable businesses are rescued and efficient returns are made to creditors, whilst also ensuring that any new tax reforms do not restrict opportunities for business rescue;
  • A review of The Pensions Regulator engagement with insolvent or financially distressed companies to improve the long term prospects of the pension scheme and the company;
  • Ensuring progress is made on concerns regarding the insolvency practitioner bonding market and a satisfactory outcome for the profession is reached; and
  • Follow-up on its commitment to review the legal framework for debt administration – including a consultation on a new ‘breathing space’ tool for indebted individuals.

We will also continue to: promote the work the profession does in tackling fraud; monitor closely the implementation of the new rules and feedback to the Insolvency Service appropriately; speak regularly with the Insolvency Service about the Official Receiver; monitor parliamentary debates and press comment on insolvency and restructuring issues including concerns around pre-packs, and much more.

Regardless of the final outcome of the election, R3 will work closely with the new Government, and Opposition, to ensure that the UK’s insolvency and restructuring framework remains world class and continues to play a key role in supporting the wider economy.






Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.