Number of UK zombie businesses at record low

The number of 'zombie businesses' in the UK has fallen to a record low across the UK, according to new figures from insolvency and restructuring trade body R3.

Relating to businesses that only pay interest on their debts, the proportion of UK firms in that position now stands at 3%.

However, the proportion of zombie firms in the North is even lower, as just 1% of businesses now find themselves in the extreme financial position.

Since R3 began tracking zombie businesses in June 2012, the current figure represents the lowest it has even been and equates to an estimated 49,000 firms.

For comparison, 9% of firms were considered to be zombie businesses in November 2012 and August 2014, while 8% were in that position in September 2016.

Other signs of business stress have also fallen according to R3, as just 1% of firms report that they would need to renegotiate payment terms, or would be unable to repay debts, should interest rates rise.

R3's Yorkshire Chair Eleanor Temple revealed that fewer firms in the North appear to be facing financial difficulties, despite economic uncertainty.

The drop in zombie businesses comes despite the first interest rate rise for a decade last November, and directors may have used the opportunity to undertake options reviews to understand their financial position.

Others may safeguard their future by refinancing, and Ms Temple has suggested that a growing number of alternative finance options has made "easier" to move away from financial danger.

It is also suggested that firms are stepping back from investing given the difficult economic climate, meaning they have more funds available to tackle debts.

Of the various distress signs studied by R3, some 16% of firms nationally showed at least once sign of distress, although that figure has dropped during the last quarter.

Businesses are also more pessimistic than three months ago, although the lack of progress regarding Brexit talks is thought to be the main reason behind that.

By Phil Smith


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