What the study examined

A study commissioned by the Guardian from Turnstone Intelligence used AI agents to read official insolvency documents covering more than 1,700 administrations commenced in England and Wales during 2019. The sweep of filings identified 544 pre-pack sales among 1,738 administrations from that year.

The methodology followed the shape of a European Union-funded 2018 study, and covered filings submitted over the past seven years. Turnstone said that period was long enough for creditor returns to settle and for buyer failures to show, and that its results were checked by other computer models and verified by humans.

The failure and creditor gap

The headline finding is a wide gap in second insolvencies depending on who bought the business:

• 44% of pre-packs had resulted in a second insolvency by July 2026 when assets were bought by a connected party
• Only 26% produced a subsequent insolvency when the acquirer was unconnected to the failed company

Payment terms also differed sharply between the two groups. In 198 of 303 connected-party administrations - 65% - former owners and directors were allowed to reacquire the assets via future instalments, while 28% of unconnected buyers used deferred payments.

Creditor returns were thinner where a connected party deferred payments. Unsecured creditors received a return in only 23% of such pre-packs, with those deals paying out 1.58p in the pound. Where the buyer was unconnected, 36% of pre-pack administrations resulted in repayments to those creditors, at a rate of 7.86p in the pound.

Concerns about phoenixism

Ben Sims, managing director of Turnstone Intelligence, said the persistence of the gap took him aback. "I was surprised how big the gap remains," he said. He added: "You would hope these deals would provide better outcomes to creditors, but we see them getting almost nothing. Of course, the biggest loser is often"

HM Revenue and Customs estimates that phoenixisms cost taxpayers hundreds of millions of pounds a year.

The new findings echo earlier work: research by the University of Wolverhampton for the government in 2014, the Graham review, and the EU-funded 2018 study both found poorer outcomes in connected pre-packs. Riz Mokal, honorary law professor at University College London who co-authored the EU study, said the findings reinforce concerns that connected-party pre-packs can allow non-viable 'zombie' businesses to shed their unsecured liabilities and continue trading.

The insolvency body's response

R3, the insolvency trade body, said the research only covered cases predating 2021 rules that "increased scrutiny of connected-party pre-pack sales and introduced additional safeguards and transparency requirements". Those changes included requiring independent evaluators to clear sales to connected parties.