A Guardian-commissioned analysis found that connected-party pre-pack businesses in England and Wales were more likely to return to insolvency, raising questions about creditor protection under a process intended to preserve trading.
The Guardian said Turnstone Intelligence examined official documents from 1,738 administrations that began in 2019 and identified 544 pre-pack sales. Researchers used AI agents to review the records, then checked results with other computer models and human reviewers. The Guardian’s account did not link a dataset or detailed methodology, and it cited no independent replication of the findings.
By July 2026, another insolvency had followed 44% of pre-packs bought by connected parties, compared with 26% of those bought by unconnected parties, the Guardian reported. In 198 of 303 connected-party administrations, former owners or directors could acquire assets through future installments. The Guardian also reported that unsecured creditors received a return in 23% of connected-party pre-packs involving deferred payments, averaging 1.58 pence per pound owed.
A pre-pack sale is arranged before a company formally enters administration, and the administrator completes the sale after appointment. A connected buyer may be a former director, certain family members or a company they control. The arrangement can keep a business trading and preserve jobs, though creditors may not learn of the deal until it has been agreed.
Rules introduced in 2021 cover substantial disposals to connected parties during the first eight weeks of administration. The administrator must obtain creditor approval or receive and consider an independent evaluator’s report. The cases in Turnstone’s analysis predate those requirements.
A government review citing 2014 research reported that 29% of connected-party pre-packs failed within three years, compared with 16% of sales to unconnected buyers. In a separate review of 163 connected-party pre-pack sales from 2016, the Insolvency Service found some level of job preservation in 72% of cases, representing about 7,500 jobs.
The broader practice of phoenixism, in which activity moves to a new company while debts are left behind, also affects public finances. HM Revenue & Customs (HMRC) estimated tax losses of about £750 million from phoenixism in 2023-24, down from £910 million in 2022-23. HMRC said the earlier estimate was revised upward as data were adjusted while debts were finalized; the figures cover phoenixism broadly, not pre-packs alone. The Insolvency Service says abusive phoenixism harms creditors, businesses that meet their liabilities and public finances.
Turnstone Intelligence Managing Director Ben Sims told the Guardian, “I was surprised how big the gap remains.” The Guardian also quoted R3 Chief Executive Caroline Sumner as saying, “A connected-party pre-pack administration sale is a legitimate and regulated insolvency process.”
