In the March 2011 budget, it was announced that the government would be speaking to a host of interested parties regarding pre-pack deals, in a bid to increase transparency.
It followed an 18 week consultation that ran in 2010, investigating alternative proposals for pre-pack deals, which had become a bugbear of industry, including the print sector.
Almost 18 months since the consultation was first launched, the coalition government has decided that there is no need to make any changes to the current system.
In a written statement, minister for employment relations, consumers and postal affairs Ed Davey said that it was apparent concerns remain about the use of pre-packs, while he was concerned about the "effects on competitors" and the potential for sales to be affected "at an undervalue".
Despite his concerns, he said: "Having taken account of all the issues, the government is not convinced that the benefit of new legislative controls presently outweighs the overall benefit to business of adhering to the moratorium on regulations affecting micro-business, which is an important plank of this government’s deregulatory agenda.
"As much of the concern was related to small businesses, I do not consider that measures should be introduced just for businesses other than micro-businesses. It is for this reason that I am today announcing that the Government will not be seeking to introduce new legislative controls on pre-packs at this time."
Davey has now tasked the department for Business Innovation and Skills to undertake an urgent review of how the existing controls on pre-packs work, and whether more needs to be done.
The move has already been met with criticism from industry. Forum of Private Business senior policy adviser Alex Jackman said: "Cutting red tape is hugely important but, against the backdrop of the Government’s de-regulatory agenda, this is one area where tighter legislation would protect more firms from phoenix companies abusing the pre-pack insolvency process by starting again while failing to pay them."
