Insolvency regime reform is an opportunity for the UK to improve on its world class position
In response to the government’s consultation on the insolvency regime, which closes on Friday 28 March, KPMG has welcomed the opportunity to evolve existing regulation but also raised concerns about unintended consequences of change in practice.
Simon Collins, UK chairman of KPMG, commented: “The UK is viewed internationally as a stable place to do business, providing a positive environment for business growth but also having an established and predictable insolvency regime to deal with corporate distress and failure which is an important part of underpinning the capital markets. According to the World Bank’s insolvency regime ratings, the UK is 7th in the world, which shows we are very much in the premier league but we could also do more; creditors becoming more engaged in the process and having a better views of costs would be two clear examples.
“However, it is also crucial that we do not slip down the rankings as an unintended consequence of reform.”
Richard Fleming, UK head of advisory and restructuring partner at KPMG, said: “We have already seen steps to evolve and improve the UK insolvency regime. The Insolvency Service introduced measures in 2010, such as improving fee options, to tackle the red tape challenge by streamlining how the insolvency profession engages with creditors. These changes are starting to take effect but we need to allow time for them to bed in.
“We are concerned that some of the possible changes are trying to tackle the wrong problem. There seems to be an over-riding presumption, for example, that costs are too high but around 90% of these costs are made up by compliance with law. While getting a grip on costs is important, we need to ensure we do not throw the baby out with the bathwater; an ill thought through focus on cost reduction could risk innovation. Since the collapse of Lehman in 2008, we have seen the insolvency profession develop new and interesting ways of rescuing business, which have protected jobs and protected more of the value of the business. We must be careful that any changes do not change this culture of innovation and business rescue. We will be supplying detailed recommendations and are calling on the profession more widely to do the same.”
