PPP update: Summer 2022

26 July 2022

With parliament entering its summer recess last week and a new government due in September, the public affairs agenda continued to be full for R3 in as we reached the peak of the summer.

This, coupled with work on new policy recommendations on fraud and corporate governance, and continued media interest in the insolvency profession, have meant a busy few months since our last update, for R3’s Press, Policy and Public Affairs team.

Personal insolvency framework review

At the beginning of July, the Government published its long-awaited review of the personal insolvency framework. The Call for Evidence is a wide-ranging review of the framework, which poses open-ended questions seeking views about its operation and effectiveness. At this stage the Government isn’t putting forward proposals for reform but this call for evidence will help to inform future policy recommendations.

As our CEO, Caroline Sumner, said, R3 has welcomed this call for evidence given that, in recent years, we have seen overarching reforms to the corporate insolvency framework but only individual reforms to the personal framework. With individuals currently dealing with the residual impact of the pandemic and with inflation at a 40-year high, now is the right time to ensure our personal insolvency framework is best placed to help indebted individuals deal with their financial issues.

The Government has, to its credit, already introduced the breathing space scheme, something the insolvency profession called for, while we also have the new Statutory Debt Repayment Plan coming online in the next 12 months. But given the range of existing personal insolvency procedures, we need to ensure our framework is coherent and leads to clear and reliable outcomes for those in debt as well as their creditors. The Call for Evidence closes on Monday 24th October. R3 will be engaging with members in the coming months to discuss the review and garner feedback from the profession to help inform our consultation response.

HMRC’s position on voting in restructuring proposals

R3 has long campaigned for HMRC to take a more constructive and engaged approach to supporting CVA and restructuring proposals and we saw an important development in this area in July.

We have said for some time that such a change in approach may mean that CVAs can become an option for a larger number of viable businesses and may help to ‘unlock’ successful restructuring efforts, in turn helping to retain value in the economy, minimise economic disruption, and save many more jobs in the process.

After lobbying the Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng MP, on the importance of HMRC taking a supportive approach to company rescue as part of our Back to Business Campaign, the Business Secretary supported our calls for the Government department to change its approach.

In July, HMRC confirmed this new approach by issuing guidance which acknowledged that it has not always voted on CVA proposals in the past, but would be doing so from now on. The guidance stated that this change was needed given the current financial landscape “where it is beneficial to try and support business restructuring to help them recover from the effects of the past two years”, as well as in light of “HMRC’s increased creditor status” in insolvencies from December 2020.

With this positive change afoot, R3 will continue to work with HMRC, and other Government departments, to ensure that the insolvency and restructuring profession can carry out its important work of supporting businesses in financial difficulty – in an environment that is as conducive as possible to business rescue.

A new Government

In early July Prime Minister Boris Johnson announced his resignation, with his replacement due to be announced, following a leadership election within the Conservative Party, on Monday 5^th September.

While we were expecting a response to the ‘Future of Insolvency Regulation’ consultation in September, a change in government will mean delay to the legislative timetable and ongoing policy development work, so we will likely see movement on these reforms pushed back. Once a new prime minister has been appointed and their cabinet is in place, we will be in touch with relevant ministers to reiterate the points made in our consultation response, and the need for the Government to take these into account when the final policy is announced.

Along with insolvency regulation, once the new Government is in place we will also be looking to publish a new policy paper containing recommendations for reform to help tackle fraud and improve the UK’s corporate governance framework. Once the new Government is on its feet we will be engaging with ministers and other parliamentarians to promote our proposals, which we believe will support government departments and law enforcement agencies in the fight against fraud help while also providing the insolvency and restructuring profession with more tools to carry out their own anti-fraud work more effectively.

R3 in the media

Media interest in R3, the insolvency profession and its work remained high over the summer months. Our analysis of business trends data was featured in a range of local publications, with a story highlighting a rise in late payments in Northern Ireland receiving pick up in the Irish News and News Letter and news of a wave of business start-ups in Scotland featuring in a range of Scottish publications including Banffshire Journal, Forres Gazette and Huntly Express.

Stories on current insolvency trends and statistics continued to be popular in June and July. Christina Fitzgerald was quoted in the Telegraph commenting on the predicted oncoming wave of insolvencies and R3’s responses to the monthly corporate and personal insolvency statistics received pickup in the Sun and the Guardian business blog as well as in a range of trade and regional publications such as Credit Connect, Accounting Web, Business Up North and Business Magazine.

News of R3’s Northern Forum also made headlines in June, in regional publications including NE Connected, the Northern Echo and News from the North.