Insolvency practitioners make £3bn in the recession

Insolvency practitioners, including IPs from legal and accounting
backgrounds, have taken £3bn in fees during the economic downturn according to
The
Sunday Times and More4 News.

The article claims collapsed companies such as Woolworths, Zavvi and Lehman
brothers has made administrators £3bn in the recession – half of the combined
Top 50 accountancy firms fee income.

An investigation by
More4
News and
The
Sunday Times found a “magic circle” of ten accountancy and solicitor firms,
including PricewaterhouseCoopers, Deloitte and Ernst & Young, made a total
of £20bn in fees over the last two years. They estimate £3bn has come from
insolvency work.

“This is an enormous extortion racket carried on behind a very opaque
screen,” said Austin Mitchell, a Labour member of the Commons public accounts
committee.

“Quietly, [these firms] are making themselves very rich,” he added.

The research finds that Deloitte made £10m in fees over the last financial
year for its administration work on Waterford Wedgewood, Woolworths and Land of
Leather.

PwC earned £154m in fees following its work on collapsed investment bank
Lehman Brothers, although they only worked on the European arm. Ernst &
Young has been paid £4.2m for its insolvency work on retailer Zavvi.

The article has already caused controversy with comments claiming the story
does not have an “even handed view.”

“Partners charge more for their time and involvement because of the value of
their experience and knowledge,” claimed D Petersen, a commenter on the story.

“But what should also be known is that they actually only charge roughly 10%
of their time because they are more concerned about selling and developing their
services. So these claims by the Times are a little skewed to promote outrage
and make a good story,” he added.

Stephen Hunt, of Griffin which investigates insolvency practitioners, said:
“I suspect many creditors are unable to distinguish between a good or bad IP as
they take very little interest once a debtor has gone bust. Unless and until
they do it is unreasonable in my view to entirely blame the IP.”

Further details of the story will be shown on
More4
News tonight at 8pm.

Further reading:

Fall out from Lehman Brothers continues