Top 50 +50 2011 analysis: Insolvency

HEADLINES ACROSS the nation’s business press may have conveyed the message that corporate administrations and bankruptcies are rife, but many firms are seeing their insolvency fee income fall, writes Rachael Singh.

Collectively insolvency across the Top 50 fell by £50m year-on-year, to £411m. Outside of the Big Four, just six firms brought in more than £10m.

In total, more than a fifth of the firms in the Top 50 have seen insolvency service lines drop in the last year, which for many is a second year of decline.

Among them are five firms that just 12 months ago boasted increases to fee income, including Larking Gowen which in 2010 grew its insolvency line 14.3% only to see it drop by 12.5% this year. Mercer & Hole posted a 6.2% rise last year and a 7.3% drop in its latest figures.

Smith & Williamson saw double digit decline of 38% in the division.

One firm recently saw the departure of one of its most high profile appointment takers, Stephen Cork, who was also its head of restructuring and recovery.

He has been succeeded by two partners at the firm, Anthony Spicer and Greg Palfrey, who became head of restructuring for the London and regional offices respectively.

PKF also saw its numbers decline to £14.7m in 2011’s chart, from £15.2m last year. The news follows the recently announced retirement of one of the firm’s most prolific appointment takers, Philip Long.

Many in the profession have pointed fingers at the government for its struggles in the sector. The UK’s well intentioned tax deferral scheme, Time to Pay, was initially brought in to give strained companies breathing space. Practitioners claim government is fuelling “zombie” companies that should be calling in professionals – as these companies are delaying an inevitable collapse or restructure.

However, it is not all doom and gloom. Insolvency firm Leonard Curtis entered the table with a fee income of £14m, with rival MCR earning £19m.
Chantrey Vellacott grew its fee income by 16.7% to £7m.

Thanks in part to the administration of Portsmouth Football Club, UHY Hacker Young managed to increase its service line fees by 1.4% to £6.53m, brining home a cool £1m. Reeves & Co’s first year offering insolvency services has raked in £500,000.

There were some firms that took the surprising stance of not disclosing a breakdown of figures, including PwC, which racked in more than £322m in fees from Lehman Brothers International alone.

RSM Tenon figures were also missing, with its figures due to be dramatically inflated following the acquisition of Vantis’ London insolvency office.

Last year, RSM Tenon pulled in £50m from insolvency and Vantis £27.8m.
_ e forecast for the future remains unclear. Many firms deployed their staff to insolvency expecting increased corporate administrations, which historically have risen post-recession.

Although practitioners around the country are claiming a spike will come later this year, this is something that is now putting the firms at risk, as they might have to restructure themselves, to cushion continuing declines.

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