A study commissioned by the Guardian and conducted by Turnstone Intelligence examined insolvency outcomes for businesses reacquired in pre-pack administrations, raising questions about the practice known as phoenixism. The research analyzed over 1,700 administrations from 2019 and focused on cases where assets were purchased by connected parties—such as former directors and shareholders—compared to unconnected buyers.
The findings revealed substantial differences in outcomes between the two groups. When assets were reacquired by connected parties, 44% of pre-pack transactions resulted in a second insolvency by July 2026. This contrasted sharply with the 26% re-insolvency rate when unconnected parties acquired the assets. Additionally, the research identified a correlation between deferred payment arrangements and poor creditor recoveries, with connected-party administrations using such terms in 65% of cases compared to 28% for unconnected buyers.
Creditor repayment patterns showed significant disparities. In pre-pack administrations where connected parties deferred payments, unsecured creditors received returns in only 23% of cases, with payments averaging 1.58 pence per pound owed. When unconnected parties were involved, 36% of administrations resulted in creditor repayments at a rate of 7.86 pence per pound. Turnstone Intelligence noted that taxpayers and creditors, particularly HM Revenue and Customs, bore substantial losses from these arrangements.
The results aligned with previous research, including a 2014 government-commissioned report and a 2018 European Union-funded study, both of which reached similar conclusions about inferior outcomes in connected-party pre-pack cases. Industry body R3 noted that the data predated 2021 regulatory changes designed to increase scrutiny and transparency in connected-party sales, including requirements for independent evaluators to approve transactions. Defenders of phoenixism maintain that the practice remains legal and can sometimes produce better creditor outcomes when experienced directors lead recovery efforts.
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