No tidal wave of insolvencies

INSOLVENCY has seen its fair share of changes and headlines (positive and negative) in the last 12 months. From government consultations, changes to pensions insolvency drive by case law, and even good news for Lehmans creditors – the industry never stands still.

However, the firms have not been bathing in a sea of insolvencies, in fact it has been quite the opposite. National insolvencies are down 13% for the first half of the year, according to Begbies Traynor which offers insolvency as its core service line.

A statement from the board said that it “continues to plan for the persistence of current suppressed market conditions”, with revenues set to decrease for the current year.

However, other insolvency specialists saw an increase in revenues, based on previous filings. Zolfo Cooper, FRP Advisory, Leonard Curtis and Harrisons are primarily insolvency-focused, and their fee income changes in the last 12 months were 53.9%, -1.3%, 0%, 24% respectively. Out of that handful, Zolfo Cooper is the major success story with a fee income of £39.8m. The appointment of its insolvency practitioners to some big collapses in the last 12 months, such as Clinton cards and fashion retailer Nicole Farhi, has helped drive improved revenues. However, Haines Watts, which runs similar to a franchise, managed to turn its fortunes around with a 100% increase, alongside Menzies – which saw similar gains. However, Menzies’ fortunes could be traced back to its acquisition of London-based insolvency business Benedict McQueen in 2011.

Other success stories include Crowe Clark Whitehill, which came in 22nd on the insolvency chart, managed to increase its insolvency fee income by 52% to a figure of £1.6m. Former managing partner Andrew Pianca, who set up the service line in 2009, said he wanted to grow the division by at least three times its size in as many years, back in a 2011 interview with Accountancy Age. He has now taken on the chairman role, with David Mellor promoted to managing partner, and Mellor still working towards that goal.

Out of the 32 Top 100 firms that declared insolvency income, 17 saw an increase in fees compared to ten which saw a decrease. Grant Thornton had the largest decline of 18.8% just ahead of RSM Tenon with 18%. Of Top 20 firms, ten saw growth, eight declined – with two failing to declare figures.

Top of the chart is KPMG, with its administrators kept busy on the world’s first Special Administration, designed for investment banks, of MF Global. The administrators even announced earlier this year there could be a 100% return to creditors. However, KPMG administrators were also kept busy with various other large cases such as; Fitness First, Peacock and JJB Sports. Meanwhile, fellow Big Four firms PwC and Deloitte were unable to give any specific insolvency information. But, if they had, they may have given KPMG a run for its money. PwC are still busy with Lehman Brothers but managed to rescue Black Cab maker Manganese Bronze in the last 12 months; while Deloitte is still letting the dust settle on its HMV administration and recently arranged the pre-pack of RSM Tenon.

This recession has had an unpredictable spin which has taken its toll on the insolvency profession. Usually firms will see an increase in administrations in the upturn, however, this time round there has been no such event. In fact, for the second quarter of the year corporate insolvencies marginally rose on the previous quarter, but were still down on the same period a year ago.

At the time, Dan Butters, Deloitte restructuring partner said: “We hold our breath to see how recent positive data and renewed CFO confidence actually translates longer term into the business recovery space, clearly this will take time.”

The unusual events have been blamed on zombie companies being propped up by government initiatives such as the tax deferral scheme Time to Pay. However, at the time of the insolvency figures being released, former insolvency trade body president Steven Law warned that the country will see an increase in corporate collapses sooner or later.

“There are signs that other creditors [aside from banks], including the taxman, are becoming a little less patient. A greater number of ‘time to pay’ proposals are being rejected by HMRC, and other creditors such as business landlords seem more willing than before to file winding up petitions in the courts.”

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Insolvency Top 50 2013 table


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