The Big Interview: insolvency chief Claire Middlebrook on the struggles facing Scots companies

There is apparently a joke in the accountancy trade that the definition of an insolvency practitioner is 'someone who arrives after the battle, bayonets all the wounded, pawns their possessions and charges their time to the relatives'.

Claire Middlebrook founded Middlebrooks Business Recovery and Advice two years ago and her business has about 250 insolvency cases on its books. Photograph: Lisa Ferguson

Aiming to shake up this perception and increase its market share with a fresher, more holistic approach is Middlebrooks Business Recovery and Advice, which launched two years ago.

It was set up by managing director Claire Middlebrook, who decided to branch out after working for larger players and identifying a gap in the market in a “fairly static” sector.

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After founding an established accountancy firm’s insolvency division in Edinburgh, she had got to the point where “I was either going to go to another organisation or I was going to go on my own”.

Opting for the latter option after deciding that the former would have resulted in the “same conversations, different day”, her business covers the whole range of statutory insolvency and has grown to a network of offices in Edinburgh, Glasgow and Aberdeen.

With evidently robust ambitions, her belief is that the firm can capitalise on its more personalised handling of cases. While larger names tend to look at the numbers, taking cashflow data and running it through a model, “they’re not actually understanding the business”, she says.

A struggling firm may have not thought about, say, whether they need a cheaper plumber rather than calling someone from a nationwide firm. “I’m maybe being a bit glib there, but that element of it is important.”

Looking at cashflow, not in isolation but rather how figures were generated, is crucial, she says. “It’s getting under the skin of it, and I think that’s hopefully what we offer that’s different.”

She also acknowledges it doesn’t hurt to offer prices lower than those at the bigger firms, “so it’s a bit of an easier sell”.

Middlebrooks has been receiving increasing corporate insolvency instructions as the number of businesses failing in Scotland has risen.

KPMG reported this month a 7 per cent year-on-year increase in 2016 to 969, although the pace eased off in the final quarter both compared to the previous quarter and the last three months of 2015. High-profile cases in the year included retailer McEwens of Perth, which was put into administration by KPMG in March, with the loss of 110 jobs.

Middlebrook also notes that the overall growth in corporate insolvency cases follows several years of uncertainty in the business environment, with some firms simply deciding that they now want to pull the plug.

“Specifically in Aberdeen, where the cash reserves are running out, we’re being consulted by companies whose group headquarters are international, but have UK arms in the oil and gas industry and they’re going to stop supporting these companies.

“I can see that filtering across the board for Scotland,” she adds, with a “difficult” year ahead expected and further uncertainty over another Scottish independence referendum fuelling unease. “International companies are starting to get a little bit wary.”

Preemptive moves are on the rise, and she has seen oil and gas firms “that are not actually insolvent, but they’re shutting up shop and getting their cash reserves out now through solvent restructuring, which we also do, and making use of tax breaks. They’re doing that now while they can.”

And while the impact of the falling pound varies in severity across sectors, Middlebrook says its effect is already evident, and forecasts consequences as it tightens its grip. “Where people can cut costs, it’s going to happen,” she says.

Her business has 250 insolvency cases on its books, comprising 150 corporate and 100 personal. It is looking to double its cases by its fifth anniversary.

Amid plans to consolidate this year, the firm’s aim is to increase its headcount from ten to at least 12 by the end of 2017, appointing a senior corporate insolvency position as this part of its business grows.

There has been a busy start to 2017, on the back of “two or three” phone calls a day from companies in distress in the week running up to Christmas.

To date, Middlebrook’s cases have included one where the taxman was trying to claw back £150 million, down to much smaller insolvencies, and the nature of the job means it can be emotional. She says the key tools for her role are “a mobile phone, a pen and paper, and a box of Kleenex”.

It inevitably involves dealing with companies and individuals who are “stressed beyond all belief”, although often it can take a weight off their shoulders.

And as emotional as business failures can be, Middlebrook is also adamant that they are ultimately an essential step “for the world to go round”. She has spent her whole career in business recovery, having joined this department at accountancy giant Arthur Andersen after studying international business and German at the University of Strathclyde.

On graduating she had decided to do her chartered accountancy traineeship with the firm. However, after the Enron scandal derailed Arthur Andersen, she took on a post in a boutique individual voluntary arrangement firm in Bolton, realising at this point that she enjoyed working in a smaller company.

“In smaller firms you get to see the whole picture,” she says. “You get to understand how a business actually works, and certainly for the type of job that I’m doing, I think that’s really important.”

She cites one meeting, when she was in her early 20s and working for a big name, when she had to give instructions to the 50-something financial director of a £200m-turnover firm. “He must have thought ‘who is this upstart?’ And I can understand that. What I try to do with my team here is I explain to them about how Middlebrooks operates so if they are talking to the company director they can talk with a little bit more authority.”

Her pre-Middlebrooks roles include spells at Begbies Traynor, Grant Thornton and Henderson Loggie, but now at the helm of her own business, she favours a less traditionally corporate environment.

“I speak quite openly and quite plainly – I don’t like to use big fancy words. What you see is what you get.”

She is now looking to explore market opportunities in a smaller owner-managed business, and sees different options as essential to grow an organisation of that nature. Such plans include growing in South Africa, where she sees great potential and where the firm could potentially open an office.

In terms of other global markets she is eyeing, she jokes that “anywhere that’s got wine” would be considered, with New Zealand also of interest.

Another growth area with an international dimension is forensic work, a stream she is keen for Middlebrooks to grow after efforts to trace assets abroad, and believes it “dovetails” well with insolvency. “One of the headcount we’re looking to recruit would be a forensic individual,” she says.

Her longer-term plan includes playing a greater role in trade bodies, having recently been asked to sit on R3, the business recovery trade body, in Scotland . She says: “I’m actually getting more interested in speaking to the government about legislation. You can’t do that and run a business so some of the plans are to allow me to do that first and that does mean relinquishing my control a little bit of Middlebrooks.”