One in ten businesses are now ‘zombies’ – R3

ONE in ten UK businesses are now ‘zombie’ companies, only able to pay the interest on their debt but not the debt itself, according to new research issued by insolvency trade body R3.  

The data shows that there are now 160,000 zombie businesses nationwide, a 10% increase on the number from the previous quarter.

R3 Midlands chairman Matthew Hammond, a partner at accountancy and advisory firm PwC in the region, said:  “Zombie companies are symptomatic of a stagnant economy, with a combination of low interest rates, low liquidation rates and many businesses running at a loss. 

“Whilst the R3 research highlights that the proportion of zombie companies operating in the Midlands is less than the overall national figure, there is still a large enough number – over 30,000 – to indicate a sizeable economic challenge for the region. 

“The banks are displaying greater forbearance on existing debt, but when a business cannot get extra lending, it is unable to recover and expand.

“On a more positive economic note, however, corporate insolvency rates remain historically low, especially when contrasted with previous recessions. Low insolvency rates are good for employment, and our relatively flexible insolvency regime has allowed many insolvent businesses in our region, especially in the retail sector, to emerge from administration with jobs or stores intact. 

“Corporate insolvencies have traditionally tended to spike in early recovery, but so far this recession is re-writing the rules.”