Pre-Pack Empirical Research:Report to the Graham Review by the University of Wolverhampton

Abstract

In July 2013, the Secretary of State for Business, Innovation and Skills, the Rt Hon Vince Cable MP, announced a review into pre-packaged administrations (“pre-packs”) and appointed Teresa Graham CBE to lead it (“the Review”). Pre-packs have in recent years created a deal of comment within the media and academia. Successive Governments have consulted on pre-packs with as yet limited tangible results. Although empirical research into pre-packs has previously been conducted by Dr Sandra Frisby, such research was conducted some time ago and was not designed or commissioned by an independent review. This report explains the methodology adopted for, and the results of, a quantitative study into pre-packs which is intended to provide the empirical data needed for the Review. The overall aim of the study was to establish a robust and up-to-date baseline on pre-pack administrations. There are approximately 750 pre-packs per annum. It was agreed that a randomly selected sample of 500 pre-packs from 2010 would be used for the study. The number of 500 was deemed to be sufficiently large for the dataset to be reliable and 2010 was selected as it permitted a regression analysis to be conducted in relation to survival of the purchaser at 12 months, 24 months and 36 months after the date of the pre-pack. In order to enable a comparison between pre-packs and more traditional administrations involving a going concern sale, the study comprises Part A which looks at pre-packs and Part B which looks at traditional administrations involving going concern sales. A random sample of 100 traditional administrations from 2010 involving going concern sales was agreed for the counterfactual analysis in Part B. Furthermore a combined regression analysis has been conducted to consider the impact, if any, of a sale taking place in either a pre-pack or trading administration on the subsequent failure of the purchaser which is reported in Part C. The findings of the report underpinned the recommendations of Teresa Graham CBE, leading to reform and the possibility for further legislative intervention within a specified time period.