An ever increasing number of businesses can only afford to pay the interest on their debts as the latest research suggests that there are currently over 145,000 ‘zombie’ companies in the UK. This is the term used to describe businesses on the point of insolvency but managing to hang on regardless.
Gerald Irwin of Sutton Coldfield based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency said that there were a number of significant signs to denote a ‘zombie’ business including renegotiation of supplier payment terms, a struggle to pay debts when repayments become due and the incapacity to pay off any debts at all should interest rates rise.
“It is not particularly surprising that retailers are beginning to show many of the symptoms associated with ‘zombie’ businesses as they represent the highest proportion that will be teetering on the brink should interest rates rise which they inevitably will at some stage in the future,” added Mr. Irwin.
Businesses are currently seeing many capital expenditure projects coming to an end further exacerbated by cuts in public sector budgets and little work available on the near horizon which leads to the expectation of an increase in business failures over the coming year.