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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