R3 lauds 'holding rescue to ransom' campaign launch

Insolvency trade body R3 has said that the launch of its campaign to force suppliers to honour contracts with companies in administration has been a success.

Last Tuesday (1 March) the organisation launched 'holding rescue to ransom', a campaign to stop suppliers from pulling the plug on contracts with companies that enter administration.

It believes administrators will stand more chance of trading a company in administration if it can rely on suppliers and may even cut the need for pre-pack sales.

The event was attended by a number of MPs, the Insolvency Service and the Association of British Insurers.

The Insolvency Service said it wanted figures on how how much money the economy could save if R3's proposals were put in place. The organisation is now working on the best way to illustrate these savings.

Steven Law, R3 president, said: "I am delighted that our campaign has secured cross-party support. I hope to engage further with the parliamentarians to ensure we can improve the UK's rescue culture."

"We are not asking for special treatment for companies in a formal insolvency. We merely want suppliers to give business rescue a fighting chance. Our members have seen cases where suppliers have more than doubled their tariffs when a company was trying to trade through an administration."

Lorely Burt, a Liberal Democrat MP from Solihull who was at the event, said: "People forget the human cost of liquidation: when a business is liquidated employees lose their jobs. While I have sympathy for suppliers, they should not be allowed to act like vultures and take advantage of an insolvent business."

Another MP attending the event, Gordon Banks from Ochil and South Perthshire, added: "I would like to call on the government to launch a consultation on this. The rescue of a business through administration tends to generate a better return to creditors than other insolvency procedures. This can only be a good thing."