2023: The year in insolvency and restructuring

31 January 2024

2023 was a year filled with many historic milestones for the UK – from the coronation of King Charles III to the Lionesses' triumphant journey to the World Cup Final. Amidst these national events, the landscape of insolvency and restructuring also saw significant changes, marking a pivotal year for R3 and the profession.

In this blog, we reflect on the biggest policy developments and standout moments that defined another fantastic year for R3.

Movement on IP regulation

On September 12^th, the Government published its long-awaited response to 'The Future of Insolvency Regulation' consultation.

Changes to the regulatory framework have been trailed for a number of years, but it was only in 2021 when plans were announced for a consultation on proposed changes to the framework were announced.

While we broadly welcome the government’s plans outlined in the consultation response, and are pleased that the Government has listened to the profession’s concerns we still have some concerns. But to start with a positive and what we see as a huge positive and a win for us and our members is the U-turn on proposals to introduce a non-independent single regulator. This move ensures regulatory certainly for the profession in the near-term and will serve to ensure public confident in our regulatory regime.

Moving on to our remaining concerns we must start with proposals for a compensation scheme to be imposed upon the profession. Although we understand the reasoning behind a compensation scheme, we are worried about its broader impact – especially the potential influx of unsubstantiated claims that this scheme may result in – as this would potentially heap an unmanageable burden on the smaller practices in the profession, and make it harder for firms of all sizes to deliver for clients and creditors.

We also welcome the introduction of firm regulation and changes to the bonding regime, but urgently need more information these proposals and how these changes will work in practice, as the details in the Government’s previous consultation around these areas were light.

The Government is now working with stakeholders from the profession to understand their views on the initial proposals, with plans to progress the areas requiring legislation when Parliamentary time allows.

When they do – and when they consult on some of the other areas of the proposed changes they have promised to, we’ll ensure the profession’s concerns, ideas and views on the proposals are heard at every available opportunity.

Reforming the personal insolvency framework

At the beginning of August, the Government published a document responding to 2022’s call-for-evidence on the personal insolvency framework review, and promised to consult on proposals for reform early in 2024.

The Government's call-for-evidence was open from July until October 2022 and sought viewpoints on three primary areas: the underlying purpose of the personal insolvency structure, funding the framework, and the efficacy of existing insolvency procedures.

Progress on this matter is welcome - a thorough review is essential to ensure that the framework aligns with the challenges of the 21st century, striking a delicate balance between providing individuals with a 'fresh start' and ensuring the fair consideration of creditors' rights in cases of 'can pay/will pay'.

However, with the consultation expected to remain open until at least the end of Spring 2024 and with a General Election likely before the end of next year, its highly likely these reforms will see further delays – delays that the UK cannot afford given the high levels of enquiries for personal insolvency.

Economic Crime Bill receives Royal Assent

On the 26th of October, the Economic Crime and Corporate Transparency Act 2023 (ECCTA) received Royal Assent following a year-long parliamentary process.

Among the Act’s new reforms are new powers to allow Companies House to act as an active gatekeeper over the creation of companies, enhanced identity verification for company directors, and improvements to registered office addresses.

Throughout last year, the Public Affairs team met with and briefed both Shadow Insolvency Minister Seema Malhotra and Lord Agnew ahead of a number of key debates and we were pleased to see some of our recommended amendments to the Bill receive support in Parliament.

However, none of the amendments tabled were incorporated into the Bill, and for this reason we are concerned that the legislation does not go far enough to fully deter and prevent fraudulent directors from taking advantage of the system to repeatedly engage in fraudulent activities.

As the legislation comes into effect this year, we will continue to seek out any opportunity to address those loopholes that remain open and will work with both members and the Government to identify how the UK can be made a safer and better place to do business.

President’s lunch

At our annual President’s Lunch we had fourteen MPs and Peers join senior members from R3. Hosted at the Cinnamon Club in Westminster, the Lunch provided a valuable platform for cultivating relationships with parliamentarians, enhancing understanding of the insolvency profession, and dispelling certain misconceptions surrounding it.

This year, we were pleased to welcome Ben Chu, journalist and Economics Editor for BBC Newsnight, as our keynote speaker, who gave an excellent talk, providing valuable insights into economic trends and sharing his thoughts on enhancing productivity and fostering economic growth in the UK.

Informing policy discussions

Throughout 2023, the External Affairs team worked on a number of industry round tables to gather insights on trending topics, better understand current market issues and inform R3's representation of members in discussions with policymakers, regulators, and the media.

Fifteen R3 members joined us for a face-to-face roundtable on Members' Voluntary Liquidations (MVLs) and their role in the insolvency toolbox. The discussion highlighted an opportunity for closer collaboration between the insolvency profession and HMRC to streamline the MVL procedure in response to the changing climate.

April saw the Public Affairs team organise a virtual roundtable to gather insights from eight members with expertise in the cryptocurrency space to inform our response to the Government’s ‘Future financial services regulatory regime for cryptoassets’.

In this discussion, it was emphasised that there would be a great challenge in developing a regulatory framework for cryptoassets, particularly in managing insolvencies, given the breadth of assets in this class and the range of different insolvency regimes that cover the sectors of the economy that use them.

Finally, in May, the newly-formed R3 Special Situations Faculty convened for a breakfast roundtable on Special Situations M&A. The discussion highlighted increased activity, but with a focus on the lower quality of available assets for investors. Mainstream and challenger banks' differing approaches to enforcement were noted, and the role of HMRC in restructuring plans and its preferential creditor status was discussed.

Thank you to everyone who attended our roundtables, and we look forward to hosting more events like these ones in the coming year.

R3 in the media

Throughout the year, R3's comments on insolvency statistics, policy updates and other industry topics received widespread media attention, with appearances in 140 national publications, making 2023 another stand-out year in terms of media coverage for R3 and its members.

In 2023, we appeared on four television broadcasts, including BBC’s News at Six and News at Ten speaking on the annual insolvency statistics for 2022, an appearance on BBC Radio 5’s Wake Up to Money also discussing the December insolvency statistics, and an appearance on BBC South East Today in October following the news that the company that owns Hastings Pier has entered liquidation. 

As well as television broadcast, in January R3’s North East Chair Chris Ferguson also made an appearance on BBC Radio Newcastle, discussing insolvency trends in the region.

Stories driven by data showcasing local business trends also gained widespread coverage across the UK's regions and nations, including stories on business startups, trends in late payments, and regional insolvency data.

Other key highlights for the year include an interview for a story by iNews, in which R3’s Deputy Vice President Tom Russell  discussed Crown Preference and its impact on insolvency processes, and an article on Credit Connect by R3 President Nicky Fisher, with her views on a fall in late payment numbers across the UK.

In 2024…

It’s been full steam ahead for the External Affairs team in January, as we pick up work on a number of big projects for the year ahead.

Notably, work has continued on an upcoming personal insolvency paper that looks at the current debt solutions for individuals and seeks to tackle how the framework could be improved to make the processes more accessible and streamlined for both debtors and creditors.

As we look forward to a new year and the opportunity and challenges that will bring, we’ve also kicked off work into a major research project looking at how the restructuring and insolvency profession has evolved since the launch of the Insolvency Act in 1986 to address the needs of the wider economy, demands of Ministers and changes in Government policy.

The research will explore how the profession will need to evolve further in the next five years to address challenges to come and to ensure we have a vibrant profession with effective tools at its fingertips.

As part of the research, we have run a members’ survey on the future of the profession to help us establish a clear picture of trends and drivers across the profession to enable us to better support the profession in 2024 and beyond. We hope that the findings will help to ensure that R3’s future objectives align with the main challenges and opportunities being faced by the profession.