A government agency has been accused of undermining the insolvency profession by being one of its most significant weaknesses.

According to research by professional body R3, the Insolvency Service is viewed by almost half of the professionals polled in a recent survey as conflicted by its role of being regulator, licensing authority and managing business failures itself.

Nick O’Reilly, chief executive of R3, said: ‘The Insolvency Service has never worked too well,’ and added that ‘it still has some way to go’ before it can be seen as a strength in the profession.

The research found that 42% of practitioners polled believe the Insolvency Service is a weakness.

Frances Coulson, a member of the R3 council, said: ‘Although the Insolvency Service is good with administrative services, it may not be as well equipped as the private sector on dealing with other parts of the job.’

‘The IS, being a regulator of and provider of licences, should be looked at. Should it regulate their competition?’ she added.

The research also found that insolvency professionals believe the single biggest problem for the insolvency profession is the long-standing issue of having nine regulators overseeing their work.

R3 plans to publish its research and present it to the Insolvency Service later this year.

The Insolvency Service will release its second-quarter results on both corporate and personal insolvency figures on 1 August.

Insolvency Service response

'In response to the article published in Accountancy Age on the 31st July ‘Conflicted role weakens Insolvency Service’, The Insolvency Service welcomes constructive criticism from all quarters. As holders of the Charter Mark and IiP we are always seeking to learn and improve.

Unfortunately in this case we stand accused but are unable to comment on specifics because although R3 have chosen to air their views in public through Accountancy Age, they have not shared the findings of their poll with us.

The Service does the job that parliament and ministers ask it to do. There is a distinction to be made between the scope of what The Service is asked to do and the efficiency with which it does it. It is not clear from Mr O'Reilly’s comments whether this point is understood and if so, which aspect it is that he is criticising.

If R3's view is that Insolvency Practitioner regulation and licensing should be the responsibility of a different body, then I am sure that they will provide a well argued case supported by evidence. In reaching a view on this question relevant factors will be, the effectiveness of the overall system of regulation, whether the interests of creditors and of debtors are well served and whether there are appropriate levels of competition in the Insolvency Practitioner market.

In the meantime I look to resuming that mature and constructive dialogue that The Service has for a long time enjoyed with R3.'

Stephen Speed, inspector general and agency chief executive

R3 response

I am concerned by the way some comments of mine on the Insolvency Service have been reported in a recent piece in Accountancy Age ‘Conflicted role weakens the Insolvency Service,’ 31 July.

In a conversation with the publication on 25 July I discussed my time working at the Official Receiver's in the early 1980s when in my view it seemed to lack leadership and direction. I stated that the service was unrecognisable now from the one I worked in then, and added that it could always improve as could all private firms of IPs.

The report we were meeting to discuss was commissioned by R3 but carried out independently by the cebr (centre for economics and business research). Entitled ‘The Value of the Insolvency Industry,’ its findings do just that, high lighting the contribution the insolvency, recovery and turnaround profession make to the UK economy. The article did not cover any of these positive aspects of the report, such as the 910,000 jobs that were ‘saved’ in 2006 from businesses in financial difficulties.

Speaking for myself, I am immensely proud of my time working in the Insolvency Service and indeed am the first person to come through the Insolvency Service to become R3’s President. Those who know me are aware of my positive feelings about this institution.

Nick O'Reilly, President of R3