CM magazine May 2019

INTERVIEW
IRON WILL
Sean Feast FCICM talks to R3 President
Stuart Frith about the insolvency
profession, Consett Steel works, and the
likelihood of Leeds United making the
Premier League.
STUART Frith likes an argument.
That’s not to say that I’ve upset him
or that the interview has in any way
turned hostile, but rather it helps
to explain, in part, why he opted
for a career in Law.
“After I realised I’d never play cricket for
Yorkshire,” he says, with tongue placed firmly in
cheek, “I looked at a career in Law. Originally, I
wanted to practice Criminal Law, but in the end
began specialising in commercial litigation and
I’m pleased that I did. Commercial litigation
tends to be project driven, and so it is less
‘personal’. As such, your competitors and your
clients become your friends.”
It has often been a source of mischievous
satisfaction to Stuart to fraternise with the
competition, and this reflects how the industry
operates: “There is a relatively small coterie
of insolvency solicitors,” he explains, “and
we tend to deal with the problem and not the
personalities that can get in the way of finding
the essential facts.”
A Scot by birth but a Yorkshireman
by inclination, Stuart lived a peripatetic
childhood. His father’s job in the civil service
meant regular moves, from Hoddesdon to
Harrogate, and Grammar School in Spalding.
“School was a traditional Grammar, with
inspirational teachers who you still remember
well and a strong sense of engagement with the
local community.”
School was followed by University in Leeds
to read Law: “Today we tell our young people
to study for a degree they are interested in, but
happily I was always interested in the subject,
and Leeds was a great place to be.”
EMINENT ALUMNI
Leeds Law Department has a reputation for
producing some highly eminent alumni,
especially in the world of media and politics.
These include: Mark Byford, the Deputy
Director General of the BBC; Alan Yentob, the
BBC’s Creative Director; Jack Straw and Kier
Starmer.
Qualifying as a solicitor in 1983, Stuart spent
the better part of 25 years practising in the
North East, before making the move to London
10 years ago. The early years were spent with
Jackson Monk & Rowe, focusing on noiseinduced
hearing loss claims from the shipyards
on the Tees, the Tyne and the Wear, for the Iron
Trades Insurance Group. “At one time there
were 75,000 claims on the Newcastle District
Register alone,” Stuart says.
His role included getting upfront and
personal with the environments in which the
claimants worked: “I remember a Consett steel
works that had a Dantés Inferno-esque feel
about it, and standing on top of a blast furnace
where the soles of your shoes began to melt.”
Today, most of the steel works and shipyards
have long-since closed down, and the rivers
that were once heavily polluted (“They used to
say you could develop a photograph in the Tees,
it was so full of chemicals,”) now have salmon
swimming free.
As Stuart’s career developed, so he became
involved with the Insolvency Lawyers
Association (ILA) and became a founding
member of the Insolvency Practitioners
Association (IPA). The perceived conflict of
the IPA being both a regulated professional
body that was also the insolvency industry’s
trade association led to a new trade body being
established which was ultimately branded R3.
“I had a coffee with Andrew Tate who was
President at that time and my name was put
forward to succeed him. It was then my 36th
year in practice and I wanted to give something
back.”
Andrew Tate had instigated a root and
branch review of R3 to accommodate the
evolving needs to its members, including
those involved in turnarounds. The review was
against a background of a challenging market
whose issues accelerated after the collapse of
Lehman Brothers. “I’ve lived through a
number of recessions, and after every one
there is someone who says ‘you must be
busy!’
REMEDY OF CHOICE
“Banks used to use administrative
receiverships as a remedy of choice; Peter
Mandelson and the Enterprise Act made
administrations easier. Then came the
boom and bust economy, the deregulation
of the financial services industry, and the
global financial crisis which led to the
effective nationalisation of the banks, and
everything changed. Their attitudes to
lending and administrations changed. We
need a buoyant economy for companies
to buy the assets from an insolvent
business.”
With the banks having to reconstruct
their balance sheets (“There has been a
great deal of debt trading,” Stuart says), and
the concurrent emergency of hedge funds
working to a different agenda, Stuart says
that far from the economic misery leading
to happy days for IPs, the insolvency
profession was in fact shrinking. It was
this that led to the strategic review – in
effect giving members what members
needed – and it is a strategy that has been
continued by successive Presidents. “We
are in continuous listening mode,” Stuart
says.
ZOMBIE FIRMS
The economic woes and bank
restructuring led to some in the profession
– and the media – to coin the term ‘zombie
companies’ – those companies that are
in effect insolvent but kept alive by their
banks, perhaps fearing a backlash if they
are ‘allowed’ to ‘fail’. “Some companies are
certainly just managing to get by,” Stuart
explains, “helped by low interest rates,
but any fluctuation in those rates could
make a difference.”
Pensions deficits are a particular issue:
“In restructuring a business, you may find
that you have an underlying business that
is profitable, but a pension deficit – and
how that deficit has been evaluated – that
places a significant financial burden on
the firm and its future survival. There
are several high-profile examples in the
market, not least BHS.
“Kicking the can down the road was
clearly happening,” Stuart continues.
“Banks do not appoint as a matter of
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