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They are now responsible for 60 per cent of petitions to wind up companies, up from 58 per cent last year and just 42 per cent in 2001, according to research from accountants UHY Hacker Young.

Research carried out by the firm reveals that HMRC is taking an increasingly hawkish approach towards businesses who owe it tax or national insurance contributions.

UHY Hacker Young say that since HMRC lost its status as a preferred creditor in 2003 it has been quicker to close down companies who have fallen behind with payments.

Preferred creditor status gave HMRC access to the assets of an insolvent business ahead of other creditors.

Edward Cook, partner at the firm’s Manchester office, explains that HMRC is now clamping down on companies who have fallen behind with payments much earlier and more frequently.

“They want their money and if this means jobs have to be lost then so be it,” Cook says.

He adds that whilst companies will generally have built up a good working relationship with their other creditors, that will allow them to negotiate a standstill on payments, it is now almost impossible for them to establish that kind of relationship with the taxman.

“HMRC won’t show any hesitation in pulling the plug if it thinks a company won’t be able to repay them,” Cook adds.

Creditors can expect to receive far less for the business assets of a company forced into compulsory liquidation than if the company had been wound up voluntarily or entered Administration with a pre-pack sale of the business as a going concern.

Cook says that forcing a company into compulsory liquidation should be the very last resort.

In his experience creditors can generally recover a higher proportion of the money owed to them if they can come to an agreement with the directors, or if they can persuade the directors to sell the business as a going concern, usually through administration.

Cook believes that allowing a business to continue to trade and giving an administrator time to market a business as a going concern will mean that potential buyers will value the business more highly.

“These figures suggest that HMRC is often too quick off the mark to wind up a business,” Cook concludes.

He says that if a company does fall behind on its tax or VAT payments it will need to act quickly to negotiate an affordable repayment plan with HMRC.

“Company directors who can’t come to a workable agreement with the taxman, or who break the terms of an agreement will find that HMRC will be very quick to push the button on their business,” Cook warns.


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A predicted golden age for distressed debt hedge funds has so far failed to materialise in spite of the global credit crisis, but 2008 should be their year.

"You ain't seen nothing yet ... It's going to be huge," said one funds of hedge funds executive who declined to be named. "The tea leaves are not difficult to read."

After the start of the credit crisis this summer caused by the U.S. subprime meltdown, and after subsequent turbulence in equity and bond markets, a number of funds of hedge funds have again turned to distressed investing, a cyclical strategy that tends to do well when times are tough for everyone else.

Distressed funds look to buy the discounted bonds, loans or other debt of firms that have defaulted on debt payments or are set to enter bankruptcy or financial restructuring and bet they can weather the storm and earn strong returns from a turnaround.

Given that a prolonged period of ample liquidity and easy borrowing conditions is over and many banks are stuck with debt they are keen to get rid of, distressed funds, which have had slim pickings in recent years, should be coming into their own.

The problem is that these opportunities have so far failed to emerge -- in part because corporate defaults remain so low.

According to Moody's Investor Service, the global "junk" bond default rate was at a 26-year low of 1 percent in November.

"As it stands, it's a bit precipitous to suggest there are lots of opportunities," said Tim Gascoigne, a fund of hedge funds manager at HSBC Alternative Investments.

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The proportion of households paying more than 20pc of their gross salaries on mortgages and other debts is now higher than it was in 1991, amid the last housing crash.

The revelation comes in the Bank's Quarterly Bulletin, which also showed that the proportion of households facing trouble maintaining payments is at the highest level for almost 15 years. It underlines the struggles families are facing, with interest rates having touched a peak of 5.75pc earlier this year.

Although the Bank has now cut the cost of borrowing by a quarter percentage point, an increased number of families are expected to be hit by higher mortgage costs in the wake of the credit crisis on financial markets.

The Bank's report said: "A slightly higher proportion of mortgagors in the 2007 survey devoted a relatively large share (more than 20pc) of their pre-tax incomes to debt service than was the case in the 1991 [survey] when nominal interest rates were over 10pc."

However, the Bank indicated that it was reassuring that, meanwhile, the number of people reporting problems paying their mortgage was still lower than in 1991.

The report also highlighted the plight of those who are not yet on the housing ladder. It said that a fifth of renters with unsecured debts on credit cards and overdrafts said their debts were now a "heavy burden" - a record level.

Meanwhile, the flow of money into the world of commercial property has turned negative for the first time in many years as investors flee the troubled sector, the report shows.

The Bank raises particular alarm over the state of the office building market. It reports that returns from commercial property have dived into negative territory - and warns that losses from the sector could worsen even more in the coming months.

In its comprehensive look at markets, the Bank also indicates that the turmoil in the City's money markets can now officially be classified as a credit crisis, with banks increasingly concerned about the state of each other's balance sheets.

However, it said one of the biggest worries facing the markets was the knock-on effect of a crash in the commercial property sector.

"A particular concern among contacts related to the position of funds which invested exclusively in commercial property," it said. "UK property funds recorded net redemptions in October from both retail and institutional investors. In the same month, commercial property prices fell sharply in the United Kingdom and returns on commercial property slowed significantly.

"To the extent that commercial property funds became forced sellers of their assets, this could potentially further undermine returns."


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HER Majesty’s Revenue & Customs (HMRC) is taking an increasingly aggressive stance against businesses that fall behind with tax payments, according to research from Wrexham-based accountancy firm UHY Hacker Young.

Its findings show HMRC is now responsible for 60% of petitions to wind up companies, up from 58% last year and just 42% in 2001.

UHY Hacker Young said since HMRC lost its status as a preferred creditor in 2003 it has been quicker to close down companies that have fallen behind with payments. Preferred creditor status gave HMRC access to the assets of an insolvent business ahead of other creditors.

Anthony Thomas, partner UHY Hacker Young said, “HMRC is now clamping down on companies who have fallen behind with payments much earlier and more frequently.

“They want their money and if this means jobs have to be lost then so be it.”

“While companies will generally have built up a good working relationship with their other creditors that will allow them to negotiate a standstill on payments it is now almost impossible for them to establish that kind of relationship with the taxman.

“HMRC won’t show any hesitation in pulling the plug if it thinks a company won’t be able to repay them.”

However, according to the North Wales firm, creditors can expect to receive far less for the business assets of a company forced into compulsory liquidation.

Mr Thomas added, “Forcing a company into compulsory liquidation should be the last resort.

“In our experience creditors can generally recover a higher proportion of the money owed to them if they can come to an agreement with the directors, or if they can persuade the directors to sell the business as a going concern usually through administration.”


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Banks are being accused of pressuring customers who have financial problems to take out expensive loans to try to ease their debts, the BBC has learned.
Some banks are repeatedly telephoning customers to try to get them to take out costly loans, against the advice of debt charities.

Citizens Advice said it had received many complaints about the increasingly aggressive tactics being used.

Banks say interest rate charges are up to them.

Continually telephoned

The BBC's Breakfast programme has discovered some customers who have an agreed debt repayment plan with a debt advice charity are being put under pressure to take out loans, sometimes at a higher interest rate than they are already paying.

One HSBC customer, Simon Chandler, said that even though he had declined the bank's offer of a "managed loan", they had continually telephoned him to try and make him change his mind.

The interest rate on the managed loan is 13% - double what he is paying at the moment.

He said: "I have had multiple letters from HSBC saying they want to help people in financial difficulty - when clearly they don't.

"HSBC have agreed that the amount I can repay each month is acceptable. But the only way they will accept that repayment is if I enter in what they call a managed loan."

In a statement HSBC said: "As a responsible lender HSBC only offers a managed loan to customers when all other lending options have been exhausted. Mr Chandler's loan is flexible and affordable.

"Now back in full time employment he can make additional monthly payments when possible and his interest rate can be revised after a period of good repayment - typically just one year."

Citizens Advice (CAB) said it was aware of many cases in which people in debt have offered to make payments where the bank has asked for more than they can afford.

In some cases, customers had asked their bank to deal with a debt advice charity, yet they were still being sent aggressive letters and receiving pushy phone calls.

Aggressive letters

Peter Tutton from CAB said: "We see a lot of cases of people coming in who have tried to talk to their banks about arranged payments and they haven't been listened to, and they have been asked for more than they can afford.

"Typically people find that, even after they have been dealing with us, they have found that they have been continued to be written to. They get aggressive letters and phone calls from their lenders."

The banks' organisation, the British Bankers' Association (BBA), said banks were happy to work with debt advice charities.

However, it said they have to make their own judgement about the interest rate they charge and how much someone can afford.

Eric Leenders from the BBA said: "The work that banks do with intermediaries like money advice trusts are essentially negotiations - they are not necessarily conclusive."



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The full scale of the shutdown in debt markets around the world has been laid bare by figures showing that growth in corporate bond markets almost ground to a standstill in the late summer.


The Bank for International Settlements reveals today that companies in the UK have cut back on their borrowing at the fastest rate in over three years. In Germany, Europe's biggest economy and the world's biggest exporter, businesses paid back more than they borrowed for the first time since the 1980s.

The figures, published in the BIS's quarterly survey of financial markets, come amid growing speculation that Bank of England deputy governor Sir John Gieve may be asked to resign for his part in the Northern Rock fiasco. The Bank has maintained that the health of London's money markets has not been considerably worse than in other currencies, defending its comparatively stern stance on pumping extra cash into the system.

However, the BIS - an international group of central bankers - said that, in fact, the UK "saw some of the sharpest increases [in interbank lending rates] in this period, as illiquidity problems at the lender Northern Rock became more and more evident".

The BIS said that although the crunch started in the money markets, where banks lend to each other, it is now preventing companies from borrowing and investing as heavily as they have done in recent years.

It said the value of bonds issued by businesses in the international debt markets halved between the second and third quarters of the year. The $396bn (£195bn) issued was 4pc lower than the same period last year - the first fall in two years - as banks led the charge of businesses out of the credit markets.

In Germany, whose banks have been some of the biggest victims of the sub-prime mortgage crisis in the US, some $20bn more was paid back than borrowed.

The flight from borrowing was even more dramatic in emerging economies.

The BIS said it would not be clear until well into next year how much money banks and investors stand to lose as families in the US housing market default on their mortgages.

It said one of the most important developments during the crisis had been the role hedge funds are now playing in supplying extra cash to the market.


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The profession is set to weather the storm of the credit crunch, with firms well-placed to avoid the culls and cutbacks elsewhere in the City.

‘The outlook is healthy. We are not planning any job losses and are continuing to recruit. We are hungry for people,’ a KPMG spokeswoman said. Firms are especially looking for people in tax, they indicated.

A survey of 2,000 employers conducted by recruitment consultants Manpower showed that the number of companies expecting to hire staff in the first quarter of 2008 was still greater than companies expecting to cut jobs, but that the margin between the two was the narrowest it had been for six years.

The Big Four are planning to match the graduate recruitment levels of previous years, taking in approximately 1,000 students each.

Other businesses in the Square Mile are expected to slash headcounts for the first time since 2001, with investment banks set to suffer the heaviest losses. UBS cut 1,500 jobs in October and Dresdner Kleinwort is planning to reduce headcount by 200 before 2008.

So far accountants have managed to avoid the credit-crunch fallout by focusing on emerging markets.

The firms also said this week they were expecting a growth in insolvency work as the credit crunch hit and businesses suffered. ‘We’re expecting a material increase in business,’ said Mike Jervis,.


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Scotland's oldest ski centre has been taken over in a management buy-out, according to its website.
Liquidators had been appointed for Glencoe Mountain Resort, which took over White Corries when it went into receivership about three years ago.

Along with Scotland's other ski centres, Glencoe has suffered from a lack of consistent seasons because of poor snow falls.

The resort's website said it was open for business.

Invocas were appointed provisional liquidators. It said its primary aim was to safeguard the business.

Charlotte Wright, Highland and Islands Enterprise's area director in Lochaber, said the agency would do whatever it can to help keep the Glencoe centre open.

She said: "Generally, we can assist if there is the investment in a business.

"If there is a new buyer, or there is a kind of rescue situation that the current owners can come up with that involves further investment, then we may be able to assist with that in terms of capital."

Originally known as the White Corries, it became Scotland's first commercial ski area with the construction of an overhead ski lift in 1956.

The resort covers 494 acres on the Meall A'Bhuiridh Massif and has seven lifts and 19 runs.



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The number of companies becoming insolvent in 2008 is set to rise to the highest level in five years, says new research.

An anticipated 17,697 UK businesses will fail next year, up nine per cent on the expected level for 2007, according to accounting and business advisory firm BDO Stoy Hayward.

The increase in the number of businesses forecast to go to the wall comes amid a prediction the ongoing credit crunch and higher interest rates will increasingly bite over the coming months.

BDO's forecast comes despite the quarter-point interest rate cut implemented by the Bank of England last week, in response to signs of an apparent economic slowdown.

Today's report anticipates economic growth will slow to 1.8 per cent in the period
ahead.

As a result business failures are predicted to rise even further in 2009, when business insolvency rates are expected to increase to 18,142 – a level not seen since the dot.com bubble burst.

Manufacturing is forecast to be among the sectors worst hit, with a weakening world economy, tougher international competition, high oil prices and a decline in production expected to contribute to business failure rates in the industry rising from 1,887 in 2007 to 1,994 in 2008.

A greater number of retailers are also expected to go bust next year, when consumer spending is expected to fall sharply. BDO claims interest rate hikes next year will encourage shoppers to save rather than spend.

Expectations of a housing market slowdown are also likely to lead to an increase in the number of construction firms which fail, largely as a result of delays to development projects, the research suggests.

Meanwhile insolvency rates among service sector firms are forecast to increase by 15 per cent year-on-year in 2008, with the majority of failures set to come from the financial services industry – the most vulnerable to the impact of the ongoing global credit crunch.

Commenting on the figures, Shay Bannon, business restructuring partner at BDO Stoy Hayward LLP, said: "Businesses in most sectors will need to prepare for a more challenging economic environment as the global credit crisis kicks in."

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UK firms are preparing for a busy year of insolvencies in 2008, as they fear the credit crisis will deplete the cash reserves which normally would have saved troubled businesses going bankrupt.

Industry experts anticipate insolvencies will rise by as much as 10% as banks increasingly take a more conservative approach to lending and other investors such as private equity groups and hedge funds, which have saved troubled firms in the past and are now taking a more cautious view on risk.

The insolvency department at PricewaterhouseCoopers (PwC) is bracing for a busy new year, The Times reports. ‘We’re expecting a material increase in business,’ Mike Jervis, a partner at PwC’s London office, said. ‘If you gauge from the last economic downturn between 2001 and 2002, there could be a 10% increase in corporate insolvencies.’

Phillip Davidson, KPMG head of restructuring advisory, said normal trading conditions had been suspended for the last few years. ‘Companies have been kept alive artificially, but now they’ll be caught up,’


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Corporate insolvencies are set to hit seven-year highs in 2008 as weak businesses face a potential treble whammy of rent demands, stricter auditing and downbeat consumer spending at Christmas.

Insolvency and restructuring professionals are braced for the sort of level of business failures last seen in 2000-2001, when the dotcom boom turned to bust, and some are recruiting more staff to help cope.
All types of corporate insolvencies - chiefly administration, for firms that can be rescued, and liquidation, for those that cannot - could rise by between 20% and 25% next year, one senior professional source told Financial Mail.

Meanwhile, crumbling house prices are likely to be highlighted in Thursday's November survey from the Royal Institution of Chartered Surveyors.

Last week's quarter-point cut in the Bank of England's official interest rate to 5.5% is thought to have been triggered in part by weakness in house prices, though analysts were sceptical as to whether it alone would be enough to stop the rot.

But while the property market is being shaken by the global credit crunch, there are fears that some companies are already doomed.

According to insolvency insiders, three immediate obstacles threaten the survival of weaker firms.

First, business faces the feared slowdown in consumer spending as households feel the pinch from the credit squeeze - not least because falling home values make them feel poorer - and cut back on spending.

Second, December 25 is the next 'quarter day' on which business rents traditionally fall due. Poor sales in the run-up to Christmas would make this a testing time for retailers.

A third factor is auditing - public companies whose financial year ends on December 31 will need to have their accounts approved by April 30 and auditors are reportedly getting tough on what constitutes a 'going concern'.



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Accountants predict rise in insolvenciesPeter Stiff
The country’s leading accounting practices are expecting a rush of insolvency work in the new year, amid fears that the credit crisis will dry up the “wall of cash” that in the past has saved troubled businesses from going bust.

Industry experts predict that the number of insolvencies will rise by as much as 10 per cent now that banks are taking a more conservative approach to lending and other investors, such as private equity groups and hedge funds, which have saved troubled firms in the past, are taking a more cautious view on risk.

The insolvency department at PricewaterhouseCoopers (PwC) is braced for a busy new year. “We’re expecting a material increase in business,” Mike Jervis, a partner at PwC’s London office, said. “If you gauge from the last economic downturn between 2001 and 2002, there could be a 10 per cent increase in corporate insolvencies.” He believes that the department’s business will pick up by 5-10 per cent in the first quarter of next year and gather pace throughout 2008.

Phillip Davidson, KPMG’s head of restructuring advisory, said: “There has been a suspension of normal trading conditions in the last few years. Companies have been kept alive artificially, but now they’ll be caught up.” He added that companies that had been given a lifeline by their banks would struggle to refinance their debt, against a backdrop of higher interest rates and worried lenders. He did, however, note that funding would still be available for the right companies, even if economic conditions got worse.

The insolvency business has, on the whole, slowed this year. On Friday Begbies Traynor, the country’s biggest independent insolvency practice, said that full-year operating profit would be 20 per cent lower because of a lack of insolvency work over recent months. However, Ric Traynor, the company’s founder and executive chairman, believes that the number of corporate insolvencies could double over the course of 2008, from the present level of about 15,000 a year.

According to Stephen Akers, a recovery and reorganisation partner at Grant Thornton: “Whereas before maybe seven out of ten companies in difficulties could be restructured, the number could fall to four out of ten as less options are available. Businesses in difficulty can limp on, but in another couple of months they’ll be out of ideas. Raising finance is incredibly difficult and by late March, early April the statistics will demonstrate the effect of the credit crunch.”

The insolvency business typically runs up to six months behind general market movements because of the time between a company telling its bank that it has problems to the day that it becomes insolvent.


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Many young Britons are committing financial suicide with a high-spending lifestyle they cannot possibly afford, experts have warned.



They are pursuing the lifestyles of A-list celebrities with only a Z-list income, often displaying a reckless attitude to borrowing, say the researchers.

Many young adults do not view bankruptcy as shameful, instead seeing it as a tool to escape large debts amassed though buying fashionable clothes, going on exotic holidays and socialising.

"The use of credit to meet everyday expenditure was a way of life," according to the report of the study.

"For some the line between needs and wants was virtually indistinguishable."

Bank of England figures show borrowing on overdrafts, personal loans and credit cards has surged in recent weeks.

It is not clear whether this is a sign of feckless spending or evidence that many are being forced to borrow more simply to make ends meet.

The latest research was carried out by the Personal Finance Research Centre at Bristol University and Commissioned by Standard Life Bank.

The team said: "Young adults seemed especially susceptible to strong pressures to consume."

Researchers found that parents are increasingly being forced to put their own finances on the line in order to bail out their adult offspring. This can involve borrowing against their homes.

Twenty years ago, going bust was a mark of shame and a demonstration of failure.

However, the researchers found: "A core minority saw debt consolidation and insolvency as easy ways out of problem debt."

Chief executive of Standard Life Bank, Anne Gunther, said: "We are not only seeing people trying to 'keep up with the Joneses' but also aspiring to a lifestyle more akin to A-list celebrities.

"Credit is not only freely available but considered a way of financing lifestyles rather than reflecting need.

"A seismic change in mindset is required to begin to unwind the chronic debt issues we face in the UK.

"Pinning your hopes on housing equity or thinking that insolvency is the easy way out is financial suicide."



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Borrowers who believe rising house prices or insolvency will solve their debt problems risk "financial suicide", a report has warned.
The Personal Finance Research Centre found young adults relied increasingly on borrowing for day-to-day spending.

The report said parents also felt pressured to borrow to provide for their children.

But it warned against a mistaken belief that rising house prices or insolvency provided an easy route out of debt.

'Disconnect'

According to the research, increased expectations about living standards, coupled with the ready availability and relative cheapness of credit, mean many borrowers have little desire to seek an alternative.

The report said using credit to meet everyday expenditure was a way of life for many young adults, with the difference between needing something and merely wanting it often "virtually indistinguishable".

The research also highlighted what it called a "disconnect" between the perceptions and reality of potential debt solutions.

A core minority of young adults see debt consolidation and insolvency as offering easy routes out of problem debt.

And all age groups see property as the ultimate solution to future financial needs.

'Seismic' change

The chief executive of Standard Life Bank, which commissioned the research, said consumer attitudes to debt had changed "dramatically" in recent years.

"Credit is not only freely available but considered a way of financing lifestyles rather than reflecting need," Anne Gunther said.

"A seismic change in mindset is required to begin to unwind the chronic debt issues we face in the UK.

"Pinning your hopes on housing equity or thinking that insolvency is the easy way out of debt is financial suicide," she added.

Standard Life is calling for current initiatives on financial education and capability to be reinforced and strengthened.

The Consumer Credit Counselling Service (CCCS), a debt advice charity, pointed out that although the amount of consumer debt has risen in recent years, only about 7% of borrowers get into financial difficulty.

It also wants a more coordinated approach from government, regulators and individual providers.

"Borrowing is a sensible way for 93% of people to mange their financial lives," said CCCS chairman Malcolm Hurlston.

However he stressed the importance of seeking professional help as soon as debt problems arise.

And he agreed the assumption that an increase in property prices would act as a "get out of jail card" was worrying.

In fact, he argued that owning a home could leave some borrowers at greater risk of debt.

"It's time to put an end to the old shibboleth that buying a house is always good for you," he said.

"A large proportion of the people who turn to us for help are those who have taken out mortgages which they cannot afford, leaving them highly vulnerable to interest rate volatility," he added.

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Banks are bracing themselves for more bad news on their already-pummelled debt after Moody's Investor Services said it was widening its debt review.
On Friday the credit-rating agency said it had either already cut or might cut the ratings of $116bn (£56bn) of debt.

Moody's pointed to the continuing fall in the value of investments made by Structured Investment Vehicles (SIVs),

SIVs, which are affiliated to banks, package debt such as mortgages into bundles and sell them on to investors.

Their value has plummeted since the summer as a result of record levels of mortgage defaults in the US.

Banks worldwide that had bought SIVs based on US sub-prime mortgages suddenly found themselves holding large amounts of debt of questionable value.

Sub-prime mortgages are offered to homebuyers with inferior credit records or low incomes and so present a greater risk for banks.

Many analysts have suggested that the ratings given to SIVs that included sub-prime debt were too favourable.


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The company behind Plymouth's scrapped Girls Aloud gig is in compulsory liquidation following a court order.

City business Edge Promotions Limited is being dissolved after Plymouth County Court issued an order to wind up the business.

Edge Promotions director Shaun Hooper, who was yesterday unavailable for comment, previously told The Herald that he was facing financial ruin after losing between £50,000 and £60,000 on the event.



Thousands of fans were disappointed when the open-air Girls Aloud concert, due to take place at Newnham Park on August 11, was abandoned.

It was cancelled on July 30 after 3,500 tickets were sold. Mr Hooper had hoped 15,000 people would pack the gig and needed to sell 6,500 tickets to break even.

Any ticket holders who have not yet been refunded are being advised to contact the city's Insolvency Service to add their name's to the company's list of creditors.

According to the London Gazette, which publishes information on insolvency, the County Court made an order for Edge Promotions to be wound-up order on October 5. This was after Mr Hooper filed a petition for liquidation on August 3.

A liquidator has been appointed to collect assets and pay off creditors before the company is officially dissolved.

A spokesman for Companies House, which holds information about UK businesses, said: "Edge Promotions is being liquidated. The process is moving on towards the wind-up of the company.

"There will be a dispersal of the company's resources."

The day-long Girls Aloud gig had been originally planned for June 9, but was postponed one week before due to "technical difficulties".

It was set to include X-Factor contestants Eton Road, Booty Luv, re-formed city rockers Karrallon and party band Joey the Lips.

A spokesperson for Trading Standards in Plymouth said: "The company has now gone into liquidation, so our advice to anyone who hasn't yet had a refund is to contact the Plymouth office of the Insolvency Service to make sure their names are added to the list of creditors."


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No one likes going into a negotiation naked, relying on the other side’s good will for an acceptable outcome. Far better to arrive armed with a nuclear weapon and your finger poised over the button. You must be willing to press it, but should never have to use your threat – so long as the other side believes it is credible.

In the Northern Rock saga, the tripartite authorities – HM Treasury, the FSA and the Bank of England – hold two giant H-bombs. They could nationalise the bank or, by withdrawing their financing, send it straight into insolvency.

The trouble is, for all the Treasury’s insistence that it is keeping all its options open, these threats currently lack credibility.

Nationalisation would leave the government open to years of litigation, unless the price the taxpayer paid for the equity was high. A messy insolvency is thought to be an even worse option, because an independent administrator would freeze depositors’ accounts for months before the Treasury’s guarantee could be paid out.

Shareholders have exploited the authorities’ weak position and are threatening to block any acquisition unless the terms are favourable. Some officials within the tripartite authorities think this is a monstrous stance, given the tiny value of shareholder equity relative to the assets or the money that taxpayers are risking.

Mervyn King, the Bank of England governor, has made clear what he believes is the long-term solution. Speaking in October, he said a special insolvency law for banks was “the single most important necessary reform”.

In future he wants retail deposits to be transferred to another bank within a day or two, so the authorities could let a medium-sized bank such as Northern Rock fail without a bank run or huge loans from the Bank of England. At the same time, shareholders would not be able to hold the taxpayer to ransom, rejecting takeover deals that do not involve a sizeable subsidy.

It has now emerged that the tripartite authorities think they are close to recreating such an insolvency regime with the tools they currently have. No one favours administration or nationalisation, but they want to be sure that in the negotiations with potential bidders they have a credible alternative.

In either case, the idea would be for the Bank of England to take over Northern Rock’s deposits and pay off savers very quickly.

In the case of insolvency, the authorities would need the agreement of an independent administrator to buy the bank’s deposit book, but that should be forthcoming, as the Bank would replace the depositors’ funds with the equivalent of freshly minted £50 notes.

The key is that the administrative systems must be in place to repay depositors extremely quickly, leaving shareholders at the bottom of the queue of creditors.

Officials are confident they are just days away from having a credible alternative to an acquisition of Northern Rock. They do not want to press the button, but are beginning to feel the nukes they have always held are armed and ready should negotiations on a sale get bogged down.


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Investors in BBI Holdings, a healthcare business that focuses on diagnostics and diabetes products, should be grateful that Julian Baines, chief executive, was unable to save his first business from going into liquidation.

The determination to never repeat the same mistakes has ensured the fire of determination has burnt brightly ever since. Baines set up BB Electronics - the business that went bust - in 1987 at the ripe old age of 22. It collapsed in 1992.

"I gave too much credit to a supplier and the cash flow problems caused me to panic. There were 20 people in the business but I could not save it," says Baines.

Post-collapse, Baines became a jobbing consultant who went from one biotech company to another helping them install quality management systems to improve the core processes inside their business. He spent five years doing this knowing he wanted to run a business, but determined to grow his commercial experience to give himself a stronger chance of success next time round.

Entrepreneurs are unbalanced people who never settle. Despite his past failure, Baines kept thinking how he would develop the companies he was advising if he was running them. One of these clients was BBI Holdings and he began to think more deeply about its development. "I was fascinated by the business. I believed it was not exploiting its strength in the market and wanted to ensure it did," he says.

His relationship with Dr John Chandler, the founder, was good, and they worked out a deal whereby he became sales director in November 1998. Top-line growth quickly improved and Baines waited a further two years before leading a buyout of the business. A deal was struck in November 2000 valuing the business at £4m with funding coming from a trio of venture capital firms.

Today, the core business remains the manufacture and supply of gold reagents which are used in millions of rapid diagnosis tests globally. More than 500m tests take place every year that rely on the gold reagent component. These reagents are used to bind with specific antibodies or antigens in tests to provide a positive or negative visual signal. This makes BBI an unusual biotech company as it is cash generative, operationally profitable with a blue-chip customer base.

The business also has a growing number of diabetes care products. These include GlucoTabs which are sold in Asda and Boots to boost the strength of diabetes sufferers.

When Baines took charge of BBI, it employed 11 people, generated profits of £400,000 on sales of £1.1m. Today, the business has more than 30 different products, employs 250 people and produced sales of £9.7m and profits of £1.8m in the year to March 2007. A number of factors have contributed to the success not least the effective working relationship that Baines has built up with David Evans, the chairman, who acts as part mentor and sounding board to the chief executive.

Next year, Landsbanki is forecasting sales of £25m and pre-tax profits of £6.3m. Shares in BBI have performed well since floating at 47p in April 2004. Today, they are 155.5p valuing the business at £66.7m.

In March 2007, BBI acquired Theratase, which makes enzymes used in certain diagnostic applications, for £24.1m.

Investors have described the deal as moving the overall business up a gear. Funding for that deal came from a variety of sources including Inverness Medical Innovations, the world's largest maker of pregnancy testsInverness remains a 12.2 per cent shareholder in BBI.

The investment from Inverness demonstrates there is already interest in BBI from larger companies who might one day decide to buy it. This should encourage existing shareholders to sit tight.


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The company which is handling the future of the Derby Playhouse has said it is looking for a buyer.
On Thursday afternoon the theatre shut its doors after meetings failed to secure a financial rescue package.

Now Tenon Recovery, brought in as liquidators to sell off assets, said their role had changed to administrators for a viable business.

A spokesman said it was even possible that the current production, Treasure Island, could be restarted.

Sixty people lost their jobs when the theatre went into voluntary liquidation after the board was advised the Playhouse was insolvent.

A final performance of Treasure Island went ahead on Thursday evening when actors and staff decided the show had to go on.

It had been feared that liquidation would mean the Playhouse and contents being sold off piecemeal.

But the theatre's board, which includes members of the city council, said that after looking at the business they decided administration was a better option.

Dillip Dattani from Tenon Recovery said: "Liquidation would have effectively been a burial situation where assets would have been sold off.

"Administration would be a rescue of the business in its entirety if possible."

Financial support

He added: "Reopening the venue with the current show is a possibility but we are looking at the options.

"If there is a viable strategy or proposition that enables it to open again then we will consider that option."

The doors would remain shut for at least the next few days while the situation was clarified, he said.

The Playhouse shut after a loan from the artistic director, Stephen Edwards, was effectively blocked by the city council amid doubts over the theatre's management.

At that moment Mr Edwards said the theatre could reopen if it received donations totalling £500,000.

The Arts Council said it had pumped in £1m over the basic £700,000 backing it provided.

A spokesman for the city council denied they wanted to demolish the Playhouse and committed itself to providing a theatre "in some form".


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ONE in four people is now struggling with unmanageable debts, and up to one in three mortgage-holders could face serious financial difficulties as a result of the recent credit crunch, two reports said yesterday.

About 23 per cent of people say that their current level of borrowing either borders on being unmanageable or is no longer manageable, according to the comparison website uSwitch.com.

It said 12 per cent of people admitted they have missed payments on debts or bills during the past six months and 10 per cent have had a payment bounced by their bank.

One in ten people claims they are now trapped in a vicious cycle of debt where they may need to get further into debt just to meet their existing financial obligations, and 13 per cent may have to turn to credit to meet their living costs.

Meanwhile, market analyst Mintel said up to one in three mortgage holders could face serious financial difficulties as a result of the credit crunch.

It said lenders had become increasingly cautious following the problems in the credit markets, and as a result many homeowners would be offered less favourable terms when they came to remortgage.

It estimates that around 9 per cent of the UK's 16.5 million mortgage holders will now be considered sub-prime by lenders as a result of falling behind on debt repayments.

But it said a further 24 per cent could also be considered a high risk by lenders because of their personal circumstances, such as being self-employed or not having a regular income, or because they had moved frequently or fallen behind with household bills.

Toby Clark of Mintel said:

"Those coming off fixed-rate deals taken out before the recent interest rate rises will be particularly hard-hit."

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An online calculator that computes consumers’ insolvency rating and projects debt solutions in seconds has been launched.


The tool, developed by the comparison site IVA.com, has been designed to give the consumer a clear idea of what to expect if they decide to go down the Debt Management Plan (DMP), IVA or Bankruptcy (BR) route as a way out of the red.
The debt breakdown is divided by debt type and is presented as a pie chart that clearly states in percentages the different debt types of the individual.

The debt solution projector shows how long it would take the borrower to become debt free for each possible debt solution of an IVA, DMP,or BR is shown by.

Terry Balfour, director of IVA.com, said: “For instance, if someone has a total debt of £16,000 with a disposable income of £200 a month, the report shows that it would take them six years to pay off the debt if they apply for a DMP with interest with their creditors. If no action is taken then the debt extrapolator chart projects how the debt would grow or reduce should the borrower keep repaying what they owe”.


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The Northern Rock bank has said it favours an offer from the Virgin consortium as the preferred way out of its deep financial problems.

But if that and any other offers were to fail, then declaring the bank insolvent and bringing in administrators would be a strong alternative solution.

Somewhat like the Railtrack and Metronet insolvencies, putting a bank into administration creates some unusual and distinctly challenging problems.

A threat to people's hard earned savings is far more serious than just making it hard for them to get into work in the morning.

Bank failures are mercifully rare and the tendency is for the financial community to gather round and organize a rescue, so formal insolvency is even more unusual.

The last major case was BCCI back in 1992, where a sprawling international patchwork of banking operations went into liquidation.

It remains there even now, reflecting how long it can take to unravel a complex banking problem, especially if fraud is involved.

Security and trustworthiness

The task with a bank insolvency is deceptively simple at first

Assets must first be protected, then their value needs to be maximised.

Liabilities need to be identified and then minimised.

At the same time, staff issues need to be dealt with and the expectations of both depositors and borrowers must be managed.

The reality of course is very different.

Security issues are paramount, especially in these days of such acute sensitivity to the protection of the confidential data held by such institutions.


The greatest Day 1 priority is to secure all data and all vulnerable assets.

There are three enemies for the administrator in this area: outside hackers and thieves; systemic incompetence in a suddenly chaotic situation; and, most dangerous, disaffected insiders.

IT security experts need to be brought in at the very start to address these threats.

Hard and apparently disruptive to normality as it might be, a suitably revised version of the BCCI approach may be necessary.

Then it was thought safest to assess staff individually for their trustworthiness and commitment to helping the liquidators.

In these modern days, and if fraud is not a key issue, this can be modified.

But it would be essential to deny staff remote access to computer systems and databases until they were accepted back into the fold.


Dark corners

The administrators would need to hire in banking expertise to assist them and to oversee, from an independent standpoint, the activities of the bank's retained staff.

The first vital area for these outside experts would be to carry out a thorough review of the bank's loan book and other financial exposures.

In the case of a former building society, for example, this might seem relatively straight forward.

But with the modern fashion for complex financial engineering through swaps, credit default instruments, futures and options, who knows what they might find lurking in the dark corners of any bank's Treasury function.

Once the loan book and other risks have been assessed, action must be taken to protect their value.

There will be flaws in security documentation to be rectified where possible.

Human nature dictates suggests that borrowers or counterparties will try to take advantage of the situation to negotiate down their liabilities or refuse to pay anything at all.

A firm approach will be necessary.


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The Scottish Government's insolvency service is expected to unveil a radical restructuring of the government's approach to handing out insolvency work later this week. Larger accountancy firms with good geographic coverage are expected to be the main beneficiaries, while smaller firms and sole practitioners are expected to lose out.

Scotland's insolvency practitioners will gather at Gleneagles Hotel this Thursday for the annual Institute of Chartered Accountants of Scotland insolvency conference. The keynote speech is to be delivered by Gillian Thompson, head of the government's Accountant in Bankruptcy agency, which recently relocated from Edinburgh to Kilwinning.

Under pressure from European procurement rules and from a Scottish Government which is under financial pressure following the recent financial settlement from Westminster, Thompson is widely expected to unveil a cost-cutting procurement exercise. CAs who have traditionally handled sequestration work under contract from the agency will have to become used to a totally different approach to securing work from the agency, with the contract system that has been in place since 1993 being phased out.

Thompson will tell the accountants that the government now expects the profession to operate within a system based on three-year contracts and crucially with a much-reduced number of agents (insolvency practitioners). The total number could be slashed from the current informal group of approximately 100 to fewer than 10.

In the last year for which figures are available (2005/06), there were 4730 sequestrations for which the Accountant in Bankruptcy was appointed interim trustee. Of these the agency went on to administer 1392 internally while 3338 were dealt with by external suppliers including CAs. And sequestrations continue to rise sharply on the back of massive consumer debt.

The reforms mean that CA firms of all sizes will now need to await an invitation to tender if they want to receive any work from Thompson's agency.

Ian Mitchell, a partner in the Dundee office of Henderson Loggie, said: "Things are certainly going to be very different, although because of our wide experience of professional advice to the public sector we should have no difficulties in completing a tender document for a government agency such as the Accountant in Bankruptcy." Henderson Loggie currently has three agents recognised by the AiB. The current system is based on personal appointments by AiB of an agent to work in his or her own sheriffdom. In Henderson Loggie's case this means Lothian and Borders, Tayside, Central and Fife and Grampian, Highland and Islands.

The firm's Insolvency department spends 25% of its time on AiB work which translates to some 150 cases a year.

"We would certainly view the proposed tender as a business development opportunity for us," said Mitchell. "The signals are that a place in the winners' ring following the tendering process would lead to a greater critical mass of work, although with narrower margins."

The new procurement process is expected to represent worse news for sole practitioners who do agency work for the AiB.

A Scottish Government spokesperson said: "As agents, insolvency practitioners are aware that, as an executive agency of the Scottish Government, Accountant in Bankruptcy is required to comply with European procurement rules and have been engaged for some time now in dialogue on reforms to the current arrangements.

"As a public body, AiB also has a duty to ensure the most efficient and best use of public funds; particularly in view of the current financial settlement."


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Families are stretched to the limit of their borrowing capacity, with personal debt having almost doubled since the turn of the century, an independent report warns today.

The average adult now owes £33,000 through mortgages, credit cards and personal loans compared with £17,000 in 2000, the international accountancy firm PricewaterhouseCoopers claims.


Many households are likely to have to use their credit cards to meet rising mortages


As borrowers default on their debts in growing numbers and banks and building societies try to recoup their losses, annual fees on credit cards will become standard, the report says. These would equate to up to £30 a year.

Despite the prospect of annual charges and higher interest rates on monthly bills, many people are likely to have to use their credit cards more often to meet the rising cost of mortgage repayments.

The report comes as families prepare for Christmas, when the average adult takes on more debt than at any other time of the year.

Further pressure will be applied next year when more than a million people see their discounted fixed-rate mortgage deals end, the report predicts. They face an average rise of £140 on their monthly repayments.

The report delivers a bleak warning about the level of consumer borrowing in Britain, which now stands at more than £1.3 trillion.

It says many households have already stretched their borrowing capacity, and predicts a sharp rise in the number of people being declared insolvent.

This will put even more pressure on credit card providers who are facing "lost profits" of around £4 billion from people defaulting on their loans.

The warning comes at a time of concern over the state of the British economy following the Northern Rock crisis, the global credit crunch and signs of a slowdown in the housing market.

A partner at PricewaterhouseCoopers, Richard Thompson, said: "There are tough times ahead for consumers and credit card companies. Banks are continuing to take action in response to the rise in consumer debt by tightening their credit acceptance policies.

"Many consumers will find it increasingly difficult to obtain credit in the run-up to Christmas.

"After many years of rapid growth the consumer credit market has well and truly stalled. We believe that consumer credit borrowing levels have reached a natural ceiling."

The report calculates the overall £33,000 debt figure by adding up the debt of every person - including their outstanding mortgage loans - and averaging it out across the entire adult population.

Separate reports today predict that rising living costs will further squeeze families.

Home owners have already been hit by five interest rates increases since August last year, while food prices are rising at the highest rate for more than a decade.

A report from the Confederation of British Industry warns today that every household will have to pay at least £100 a year more for energy within the next two decades to tackle climate change.

Meanwhile, there are warnings that each British household could face paying £250 a year more in tax because of over borrowing by the Treasury, according to calculations by the accountancy firm Grant Thornton.

Roger Bootle, the managing director of Capital Economics and economic adviser to Deloitte, said: "The part of the economy on which so much else will turn is consumer spending. So far it has held up remarkably well but the omens are not encouraging. The pressure of debt on disposable incomes is intense and the savings ratio is very low. At the moment, real incomes are still rising and the labour market is strong but the position is precarious.

"Without the large increase in borrowing of the last few years by both the public and private sectors the economy would have already slid towards recession.

"As the credit supply now tightens, will it prove that this borrowing splurge merely postponed the evil day? The answer will turn, I believe, on the related issues of what happens to the housing market and what happens to unemployment."

Figures released earlier this month showed the number of people filing for bankruptcy rose by two per cent in the past three months to more than 15,000 as the global credit crunch started to hit.

The Council of Mortgage Lenders also warned recently that the number of homes repossessed during 2008 looked likely to reach levels last seen during the 1990s house price crash.

In an interview recorded during his visit to Uganda for the Commonwealth summit the Prime Minister, Gordon Brown, said he blamed the current mood of economic uncertainty at the door of events in the United States sub-prime market.

He said: "I think everybody knows that what has happened in America. It is already having an effect on the housing market and the question is what will be the effect on the rest of the world."

• House prices have fallen for the second month in a row as higher interest rates and the fall-out from the US credit crunch take their toll on the property market.

The average home in England and Wales is now worth £175,000 and property values have dropped by 0.2 per cent, according to Hometrack, the housing information group.

The group is the third firm to record monthly house price falls after Rightmove, the property website, said the average cost of a home fell by 0.7 per cent in the four weeks to Nov 10 and Halifax said it dropped by 0.5 per cent in October. This month's fall means the annual rate of house price growth is at it lowest since July last year - at 3.6 per cent, down from 4.4 per cent the previous month.

Hometrack said prices fell across a fifth of postcodes, with half of these falls in southern England, where demand has slowed most.

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Kerry Katona and her husband Mark Croft are facing a cash crisis, according to a report in the News of the World today.

Although the former pop star has earned £1.5 million in the past year from book and magazine deals, Iceland TV ads and promotional appearances, she is believed to have spent at least that amount.

Katona has learned that she must pay a £200,000 tax bill, as well as debts to other creditors. She has now brought in professional insolvency advisers to help her to dodge bankruptcy.

A source told the newspaper: "Yes, Kerry does okay but she's not bringing in footballer wages and now the debts are becoming unmanageable. It's got to the stage where she dreads the postman coming with another bill.

"She had to get these insolvency experts in because she simply can't keep up with her payments."

The report claims that OK! magazine recently cut the payment for Katona's column from £3,000 a week to £2,000. Following a series of revelations about her private life, bosses are said to have instructed Kerry to quickly change her image if she wanted to keep her job.

Supermarket chain Iceland also gave Kerry a scare by cutting her appearances in their ads and using her as a voice over, however she is now back on screen in the latest commercials.

An insider added: "Kerry was frantic with worry that she was being dumped by Iceland. It would cost her thousands. So she was hugely relieved when she was asked back."


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Debt advisers accuse bank of being too quick to repossessPhillip Inman The Guardian Monday November 19 2007
Debt campaigners challenged Northern Rock yesterday to soften its line with mortgage customers who fall into arrears after they claimed the bank was one of the most aggressive on the high street for repossessing borrowers' homes.

The stricken bank refuses to negotiate with borrowers who are unable to make monthly repayments and moves quickly to gain control of their properties rather than allow arrears to build up.

The Consumer Credit Counselling Service, which handles thousands of debt enquiries a week, said feedback from debt counsellors showed the bank was one of the most aggressive lenders dealing with customers unable to pay their bills.

Northern Rock has often stressed the strength of its loan book and its low arrears figures. It has maintained its figures for arrears of more than three months at about 0.4% of its customers, compared with an industry average of 0.8%.

The CCCS said Northern Rock refused to accept debt-management plans and routinely rejected individual voluntary arrangements, a five year repayment scheme. It is understood that the bank often offers customers further loans to repay debts over a longer period, though the bank denied this was a policy.

Malcolm Hurlston, CCCS chairman, said: "Northern Rock is one of the least charitable on the high street. It says borrowers are treated fairly, but that simply doesn't fit with our experience."

He said the bank's Together product, which combines a mortgage with a personal loan of up to 125% of the property value, was at the root of many repossessions. "The ramifications of the Together loan are felt by many customers," he said. "It blurs the line between secured and unsecured lending to the detriment of the borrower."

In many cases the customers will attempt to protect their mortgage and stay solvent by cutting back on personal loan repayments. Defaults on unsecured personal loans cannot trigger repossession orders but must be pursued through the courts.

However, the bank can apply a charge on a home to the value of the personal loan, in effect securing the entire loan against the customer's property.

Northern Rock denied that it dealt harshly with borrowers in arrears. A spokesman said the bank was well known for allowing miners to keep their homes during the miners' strike of the early 1980s and that policy persisted today


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The collapse of the Farepak Christmas savings club last year has driven many of its low-income victims into a cycle of debt, a union-sponsored report says.

Over 122,000 people have lodged claims totalling 38 million pounds with Farepak's liquidators since it failed in October 2006.

Many of those affected were low-paid women saving small sums for Christmas who went into debt to buy the gifts they had been expecting to purchase with their Farepak savings, the report from public sector union Unison said.

The study, jointly sponsored by the Centre for Crime and Justice Studies (CJSS), interviewed Farepak savers and examined the impact on their lives.


It found that for some the money they had given to Farepak was the only money they had saved for Christmas.

"I didn't have any other savings ... I was basically counting on that for Christmas," one victim told the study.

"I think it is annoying that they just treat ordinary working class people like that when they are supposed to work with you," said another.

The report called for all savers to be fully compensated -- they have been told to expect just 5p in the pound for their claims, and that there will be no payout this year.


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Irresponsible lenders are pushing people into debt, but regulators are "asleep on the job", a charity warns.
Citizens Advice says its staff dealt with a record 1.7 million debt problems during the last 12 months, an increase of 20% on the previous year.

The charity says it is working hard to help more people deal with their financial problems.

But it wants the financial services industry to do more to tackle irresponsible lending.

The director of public policy at Citizens Advice, Teresa Perchard, said: "Time and time again, we come across people in desperate straits who need not be there if the firm who lent them money had acted responsibly on day one.

"And while some regulators have taken action on scandals like the mis-selling of payment protection insurance, others seem to be asleep on the job," she added.

Falling consumer confidence

The call for action comes as the charity holds a conference on helping people to make the most of their money.

Citizens Advice is developing more new services to help prevent debt, such as providing financial planning advice, and improving people's skills and confidence.

But it says regulators and businesses must play their part to address one of the biggest issues facing the UK economy.

Teresa Perchard also warns that the collapse of Farepak and the problems at Northern Rock have pushed consumer confidence in the financial services market to an "all-time low".

Her comments come as new figures show Britons spent a record £511bn on credit, debit, charge and store cards in 2006.

Plastic spending has soared by 47% since 2002, according to market analyst Datamonitor.

The group estimates the amount spent on cards will reach £652bn by 2011.

But despite the increasing reliance on plastic, figures from the Bank of England show that the amount of money outstanding on credit cards has been falling steadily since the beginning of 2006.



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Luton Town appoints football insolvency expert Brendan Guilfoyle as joint administrator

Administrators have been appointed at troubled football club Luton Town.

It has been a bad week for the club, entering into insolvency proceedings just days after the club's former directors were charged by the FA relating to rule-breaking deals over player contracts.

Experienced football insolvency expert Brendan Guilfoyle, of the P&A Partnership, was one of three administrators appointed to the club.

The appointments were made after the club's finance director said the club could not continue due to its decreasing income and escalating liabilities.

Guilfoyle will lead the search for buyers for the club.

'The survival of this historic club will depend on finding a purchaser. We will do everything we can to find such a buyer,' said Guilfoyle.

The administration is not affected by the charges standing against the club and its former directors, he added.

But the club has been deducted ten points under League One rules, which currently puts it into the relegation zone.

Guilfoyle worked alongside Ernst & Young's Garry Wilson (now of Endless) at Leeds United, rescuing the club from its first insolvency, which culminated in the club paying off its creditors back in 2005.

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