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”.

If you believe your company to be experiencing financial difficulties, a confidential discussion with an experienced and qualified specialist to talk through the range of options available may well be the best course of action. Please contact us if you would like an initial consultation, free of charge.