John Brazier meets Neil Bennett and Andrew Duncan of Leonard Curtis Business Solutions Group to talk about the insolvency and restructuring market, diversification and the difference between London and the rest of the country.
It’s no secret that there is less insolvency work around these days; official statistics and independent research both confirm a long-term downward trend for corporate insolvency levels, especially with regard to traditional administrations. In this environment, practices of all kinds are increasingly facing the choice between adapting to the new type of work available, or losing out on business.
Leonard Curtis Business Solutions Group (Leonard Curtis) is a firm that seems to be thriving in the face of a contracting market. While its national insolvency practice has focused solely on corporate insolvency for the SME market since its establishment in 1948, the firm expanded its UK presence with a new office in Leeds in 2012, winning 111 administrations appointments that year, and following up with 129 – the most of any UK insolvency firm – in 2013.
Of course, it’s not just administrations – like many firms, Leonard Curtis is turning to restructuring and business rescue work (as suggested by the group’s full name) to build revenues. It’s not something that’s new to director Neil Bennett who, having joined Leonard Curtis in 1992, has seen the firm change from a pure corporate recovery and insolvency practice into a rather different animal.
“In 2005, my Manchester colleagues and I bought the London business of Leonard Curtis,” says Bennett, “and I think what changed then, and remains the case to this day, is the profile of the firm – at the time insolvency work was relatively quiet, and so the addition of different service lines has served us well in the decline the insolvency market has seen since the start of the recession in 2007/8.”
“We realised that we needed to be seeing people earlier, and needed the products in place to meet that need.” This, he says, spawned the Corporate Strategies division of the group.
As a consequence of this realisation, Leonard Curtis has been able to develop services and products – such as its debt finance arm the Factoring Advisory Service – positioning it to deal with a wider range of SME requirements.
Bank introductions decline
As well as the type of work it is able to undertake, the firm has had an eye on the changing nature of introductory sources – an issue director Andrew Duncan feels confident the firm has addressed.
“The asset-based lending industry is undergoing a transformation in the way it connects with the insolvency profession. If you look at where the work is coming from, and the way it’s being introduced, it’s just not really driven by the banks anymore as seen in the last recession.
“The banks are protecting their balance sheets and are under a lot of pressure as a result of a number of reputational issues. Due to this, more of the formal appointments and administration work is coming from the asset-based lenders – although they are of late more reticent to make an appointment unless they really have to.
“The market is shifting all the time and you need to move with it – if you’re an IP these days and you sit in your office and wait for the phone to ring, you’re going to end up waiting a pretty long time.”
While diversification in product and service offerings, as well as introductory sources, has been addressed, Leonard Curtis has stayed conservative in sticking to its SME client base; for example, the firm has not been tempted to get involved in complex international restructuring work. As Duncan puts it, the firm “sticks to what it knows and is good at.”
Even with that restriction, the practice has a broad remit, he adds.
“We’ve got the third biggest brokerage in the UK, we do a lot of work with the asset-based lending community, and we’re exploring other trends which are interesting at the moment; peer-to-peer lending, spot lending, and the considerable number of mezzanine lenders that are coming to the fore.”
In terms of the geographical distribution of the firm’s work, a large number of Leonard Curtis’ administration appointments were conducted by the firm’s northern offices, which Duncan puts down to differences in regional markets.
“We have been very successful in the North West, although it is widely accepted that London is a different market. The types of businesses are very different and there just isn’t the same amount of competition in that market”
“There is real hardship in some towns near Leeds and Sheffield, and it really is quite grim. The economic recovery is focused on London and it’s the service sector that’s leading that recovery. With that said, however, manufacturing is improving, and the construction industry posted some strong figures in the middle of last year.”
Bennett agrees, adding that he isn’t surprised that the high level of insolvencies many had expected at the start of the credit crunch never materialised.
“I think it’s down to one of four things: record low interest rates, banks showing forbearance and being supportive, HMRC being relatively inconsistent with its collection approach – although this may now be addressed when RTI (Real Time Information) comes in to offer greater visibility – and supportive trade creditors.”
“The real problem is the situation that the banks continue to face,” says Duncan. “It’s going to be a long road out, and if there’s no change in interest rates there’s going to be no surge in insolvencies. There will still be failures as businesses run out of money or energy, and there’s a lot of fatigue creeping in to the market, but I just don’t see what’s going to change in the short-to-medium term.”
Established: 1948, London
Offices: London, Birmingham, Bristol, Bury, Leeds, Liverpool, Manchester, Newcastle, Preston, Wolverhampton
Total staff: 150
Insolvency practitioners: 18
Administrations appointed to in 2013: 129
Administrations appointed to in 2012: 111