A Critical Review of Approaches to Insolvencies of Wide Public Impact

Recent cases, including energy supplier failures in 2021 and Thames Water's liquidity crisis, highlight the vulnerability of essential public service providers to market risks and insolvency. Current approaches - either through sector-specific special administration procedures or ordinary insolvency procedures - inadequately address the public interest dimensions of these failures. While special administrations can be effective, their sector-specific nature creates fragmentation and redundancy. Ordinary insolvency procedures primarily serve creditor interests, with limited consideration of public welfare implications. This creates a fundamental tension between market operations and essential service provision. We propose two complementary solutions: first, developing a unified special administration regime to streamline existing sector-specific procedures; second, implementing financial buffers through cross-sectoral levies or insurance requirements. This would enable proactive risk redistribution across public service infrastructure, addressing the current imbalance where private profits are retained during successful periods while failure risks are socialised.