Climate risk is difficult for large corporations to mitigate and is increasingly a C-suite agenda item. In this article, experts from FTI Consulting’s Power, Renewables & Energy Transition (“PRET”) practice draw upon their experience in climate risk-related bankruptcy, dispute advisory, restructuring and resource strategies to summarize the regulatory, operational and financial impacts of recent extreme weather events on electric utilities. This article will discuss the implications of strengthening physical and financial asset performance in a rapidly evolving electric grid.
Executive Summary
In a radical departure from settled case law, the English High Court has eroded the protections of English law creditors guaranteed by the Rule in Gibbs1 .
Table of Contents
Recent high-profile contractor collapses have made many acutely aware of the need to ensure they are adequately protected in the event of employer or contractor insolvency. This increase in insolvencies has also placed significant stress on the construction bond market. Contractor insolvencies put pressure on surety bond providers, which in turn can lead to increased rates and more stringent criteria being imposed on contractors seeking bonds.
The economic picture has started to improve, with modest GDP growth in the first half of 2024. However, the enormous strains on business finances over the past four years have caused insolvency rates to rise sharply this year.
According to The Insolvency Service’s latest figures, company insolvencies in June 2024 were the third highest since monthly records started in 2020. Administrations in June 2024 were 22% higher than in June 2023, and the number of CVAs was 64% higher in June 2024 than June 2023.
Five best practices for retailers to manage cash, cut costs, and stay afloat as debt comes due
In late 2017, a Bloomberg headline read, “America’s ‘Retail Apocalypse’ Is Really Just Beginning.” The main culprit, the authors suggested, was the amount of high-yield debt on company balance sheets, which would balloon just as a record wall of debt across all industries came due.
In my December 2022 article, I predicted that when insolvencies started to surge in the Australian economy, the worst casualties would likely be in construction.1 It’s taken a while for my predicted post-COVID day of reckoning to arrive in Australia. But it is here.
Contractor insolvencies are continuing in the construction industry in 2024. This follows recent challenges relating to supply chain issues, labour shortages, and increased material costs. Such challenges are part of the broader macroeconomic climate of high inflation and interest rates.
We outline below steps that a Principal can take at different stages of a project to mitigate the impact of Contractor insolvency on its project, and to protect its interests.
Key takeaways
Since the pandemic, during which insolvency rates were low due to Government measures, there has been a considerable rise in insolvencies in the UK and many other jurisdictions. High interest rates have significantly increased the cost of borrowing and many companies are saddled with mountains of debt that was taken out in better times and which are now difficult to repay. In addition, high inflation and energy costs, lower consumer confidence and volatile supply chains have all contributed to making the last few years very difficult for businesses.
The economic environment has created tough conditions for UK businesses in recent years. Heightened inflation, high-interest rates, and a lack of consumer confidence have all taken their toll on trade.