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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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