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Intervention needed over dodgy directors

August 28, 2018

 

Some years ago, an associate of mine, Jimmy - who runs a design firm - landed a great job. At least it seemed that way at the time.

 

A major landscaping outfit subcontracted him for work on a retail park development. There was a modest retainer involved but a very tidy payment in fees upon completion.

 

All went well until within a few months of the agreed finish date. The landscaper suddenly became insolvent and several suppliers and contractors, including Jimmy, were left seriously out of pocket. It was only through family help and bridging finance that he avoided ruin.

 

On the face of it, you might think the experience was one of those run-of-the-mill incidents that make up business risk. That would be true were it not for the fact that two of the directors from the failed landscaping firm then formed a new company which subsequently picked up the contract to finish the job

 

Of course, none of the liabilities arising from the collapse fell on the new crowd. It sounds disgraceful but it was all perfectly legal; and not much has changed.

 

So it’s welcome news that the government has finally recognised the practice of so-called "phoenixing" – creating an almost identical business from the ashes of an indebted predecessor – needs to be tackled.

 

Ministers have acknowledged how collapses at Carillion and BHS are prime examples of ‘irresponsible capitalism’ that leave tens of thousands of workers without jobs, plus massive pension deficits costing taxpayers upwards of £180m.

 

They plan is to introduce laws that will impose fines on company bosses who dissolve their firms to avoid paying off staff or meeting pension commitments. The measures fall short of actual prosecution.

 

I tend to be suspicious of headline grabbing legislation announced during summer recess; usually because it gets forgotten by Christmas. I prefer the old-school approach where intentions are stated at the dispatch box or in ministerial press conferences, and where there is at least a limited opportunity for questioning.

 

One of those questions is whether fines imposed by the Insolvency Service, who already disqualify around 1,200 irresponsible directors a year, will actually be enough of a deterrent – or even practical, when profits are stashed in off-shore bank accounts.

 

We’re told that measures will be set out in further detail in the autumn. I suppose it’s a step in the right direction but it’s a tentative one. I can’t see Jimmy being very impressed.

 

 

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Are we really talking rocket science here?

 

I know there are a lot of Brexit scare stories out there at the moment but my experience is that people in scientific professions aren’t normally prone to running around screaming that the sky is falling.

 

So when a group of them reckon Britain stands to lose serious money from annual European science funding in the event of a no-deal Brexit, I tend to listen.

 

Admittedly, claims that £1.15bn from the EU’s funding programmes for science and innovation will disappear, thus jeopardising research into cancer and other health treatments, are being made by the Scientists for EU group – which kind of represents a vested interest – but the figures are easily verifiable, in the best scientific tradition.

 

What’s more, the government compounded matters last week with updated advice to scientists conceding that a series of funds from the EU would be lost partially or entirely, including access to on-going space research facilities - notwithstanding compensatory promises to make up the shortfall. 

 

So despite never imagining that proving Brexit to be bad news would be considered rocket science – it turns out that it is.

 

 

 

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