"Allowing directors to 'have another go' if they are not culpable is an important part of our enterprise culture, and can sometimes benefit suppliers of the failed business as they may wish to trade with the new business."
Believe it or not this comment came from the Department for Business, Innovation and Skills (BIS) as it announced its review of pre-pack administration legislation on Tuesday. Would it be too harsh to infer that, as a result of this statement the government does not believe in evolutionary economics? No. And it does the road transport industry no good whatsoever.
For those interested in a bit of economic theory, evolutionary economics is Darwinian. A successful economy thrives on the survival of the fittest (companies) and the weak wither and die.
The Hub would agree with this theory. It rewards successful businesses - ones that are well run, keep employees in jobs and charge a fair price for their services.
Take, for example, one recent 'business restructure'. The Hub recently spent time with the senior management of one of its rival firms. They told us that if its rival had gone into administration, and failed, it could have taken on one of its contracts and approximately 50 of its drivers. These drivers could end up in long-term employment, rather than sitting in the cabs with fingers crossed that the company survives the next few years.
BIS does not agree. Its review states: “Used appropriately, pre-packs can be a highly effective process to ensure the best deal for creditors by better enabling the rescue of businesses, preserving value and safeguarding jobs."
This is short-term thinking. The transport industry needs stronger firms, not weak ones. it needs firms that do not default on payments, or restructure its debts at 33p in the pound, or wipe out debts and continue trading under a slightly different name. This doesn't make for a successful industry, or a successful growing economy in the UK. It creates one that is artificially propped up by the government. We will be keeping a close eye on this review.