The number of businesses just paying the interest on their debts – a key characteristic of ‘Zombie businesses’ – has jumped from 103,000 in November 2013 to 154,000 now, according to research by insolvency trade body R3. This is at its highest level for eighteen months.
But rather than a return of the ‘zombie business’ phenomenon, insolvency practitioners suspect that late payment and over-trading problems associated with economic recovery are behind the rise.
‘Zombie Businesses’ emerged after the 2009 recession when thousands of businesses that might have been expected to fail were kept afloat by a combination of low interest rates, lenient creditors, and a sluggish recovery.
100,000 businesses say they would not be able to pay their debts if there was a small rise in interest rates, while 64,000 say they struggle to pay their debts when they fall due.
‘Zombie business’ numbers peaked at 160,000 in November 2012 before falling back to 102,000 in August 2013.
Source: creditman.co.uk
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