Research has been carried out by Opus Restructuring, a restructuring and insolvency firm, using data provided by Company Watch, a financial analytics company, into the effectiveness of administration – the UK’s chief procedure for business rescue.
The firm studied the outcomes of the 4,581 administrations commenced in England & Wales over the last five years, of which 2,607 have been completed. Of these completed administrations, 7% completed the process without the need for a further insolvency procedure (more commonly property development and hotel businesses) and a further 3% completed a successful Company Voluntary Arrangement or “CVA” (a significant number of which were football clubs).
Liquidation or dissolution was the final result for the remaining 90% of administrations, including 3.5% following a failed CVA. This figure may mask some procedures where the business was rescued via a transfer to a new owner, such as by a pre-pack sale or a sale following a period of trading, although, by applying the findings of previous studies, Opus is able to estimate that this would only increase the number of ‘successes’ to 30%. Analysis of the 1,960 companies still in administration shows that 39% have been ongoing for more than a year and 15% for more than two years, despite administrations being designed to have a twelve month lifetime without extension.
Nick Hood, the business risk advisor at Opus restructuring, commented that “it’s a disappointing result, which reflects the ostrich-like behaviour of struggling entrepreneurs who wait far too long before admitting they have problems”.
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