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The OFT has today launched a market study into corporate insolvency.

The study will look at the structure of the market, the appointment process for insolvency practitioners and any features in the market which could result in harm, such as higher fees or lower recovery rates for certain groups of creditors. It follows concerns raised within Government, including the Insolvency Service which is an executive agency of the Department for Business, Innovation and Skills, and the industry itself.

A recent World Bank report showed the costs of closing a business in the UK are higher than other countries with similar or even better recovery rates. A report by R3, the trade body for insolvency practitioners, also highlighted the cost of insolvency as a relative weakness of the UK's regime.

The study covers the whole of the UK. Initially, we will collect and analyse data from interested parties including accountancy firms, law practices, government, regulators and trade bodies. The final duration and scope of the study will depend on the results of the initial phase. If the study does proceed to a second stage, the OFT expects to complete this by the end of 2010.

Clive Maxwell, OFT Senior Director of Services, said: 'We want to identify any potential problems within the corporate insolvency market to ensure that firms and practitioners are competing freely and that the market is working well for the end consumers. Efficient insolvency services are an important component of a modern market economy.'

The OFT will be speaking to key parties directly. Others who wish to make a submission should write to: Corporate Insolvency Market Study, Office of Fair Trading, Level 4C, Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX. 

Email corporateinsolvency@oft.gsi.gov.uk.
 
NOTE

1.  Corporate Insolvency covers formal insolvency procedures in relation to incorporated businesses such as,  administration, receivership, liquidation and company voluntary arrangements.  It does not include personal insolvency procedures which apply to individuals, sole traders and partnerships such as individual voluntary arrangements and bankruptcies.

2. Market studies are conducted under the OFT's general function under section 5 of the Enterprise Act 2002, which includes the functions of obtaining information and conducting research.

3. Market studies involve an analysis of a particular market with the aim of identifying and addressing any aspects of market failure from competition issues to consumer detriment and the effect of government regulations. Possible results of market studies include: enforcement action by the OFT; a reference of the market to the Competition Commission; recommendations for changes in laws and regulations; recommendations to regulators, self-regulatory bodies and others to consider changes to their rules; encouraging firms to take voluntary action; campaigns to promote consumer education and awareness; 'a clean bill of health' for the industry.

4. The OFT is unable to provide advice or resolve individual complaints for consumers. Consumers can seek advice from Consumer Direct (tel: 08454 04 05 06, www.consumerdirect.gov.uk).

5. The World Bank published a report 'Doing Business 2010', which is available at www.doingbusiness.org.

6. R3 is the professional association for insolvency, business recovery and turnaround specialists in the UK.  R3 published a report called 'The Value of the Insolvency Industry', which is available at www.r3.org.uk/publications/default.asp?dir=professional&pag=Thensolvencyindustry&i=475.