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14/11/2019

The World Bank insolvency rankings: A reminder reform is needed

The publication of the World Bank’s Doing Business 2020 report has provided a reminder that progress is needed on corporate insolvency framework reform in the UK.

At 14th, the UK’s position in the ‘Resolving Insolvency’ table remains unchanged from last year (see chart), and the year before. While it is somewhat positive news that the UK’s position has not declined since last year’s report, we are at risk of falling behind countries who are improving their insolvency frameworks – and the only way we can progress up the rankings is by reforming our own framework.

Improvement has been on the agenda since May 2016, when plans for corporate insolvency framework reform were unveiled, but their progress has stalled. The last public announcement on the reforms came in August 2018, when the Government jointly responded to the 2016 consultation, and to a separate consultation from earlier that year on corporate governance and insolvency.

The Government pledged to introduce reforms to the corporate insolvency framework through legislation when 'parliamentary time allows', but sadly, no clear timetable was given for this. In a political climate that could best be described as ‘turbulent’, other items have understandably taken priority on the parliamentary agenda and all has gone quiet on the proposals, although work has continued behind the scenes to get them ready for the statute books.

The UK cannot afford to stand still on corporate insolvency reform. Our current insolvency and restructuring framework is strong and internationally well-regarded, but there are still areas of it that could be made more responsive, and which would make it easier to rescue jobs and businesses if they were reformed.

There is no certainty as to the eventual form that Brexit will take (or even if it will happen by the newly-agreed third deadline). But we do know it will have an effect on cross-border restructuring and insolvency cases, so the UK has a lot to gain from modernising the underlying framework and maintaining its international competitiveness.

The insolvency and restructuring profession and the UK economy deserve an insolvency framework which facilitates business and job rescue, and which evolves with the world it operates in.

Hopefully whoever sits on the Government benches after the next General Election will realise that – and will make progress on the reforms, to help the UK move up the world rankings.

Source: World Bank/R3

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 www.r3.org.uk 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.