Zombie Figures Fall Welcome ‘But More Problems Likely’

Corporate Recovery Specialist Comments On Latest R3 Figures


By Rob Dixon

New figures showing a fall in the number of so-called ‘zombie’ businesses operating in Yorkshire and the North East has been cautiously welcomed by corporate recovery experts, who have warned that such problems are unlikely to go away anytime soon.

According to research from insolvency body R3, 6,000 zombie businesses – firms only able to pay interest on debt rather than on the debt itself – currently exist in these regions. The figure equates to four per cent of all businesses and is a fall of five per cent from November 2012.

However, the statistics also found a number of businesses are continuing to suffer cashflow problems, which indicates many may still be struggling.

Andrew Walker, a Partner and specialist in corporate restructuring and recovery at Irwin Mitchell’s Leeds office, said the findings were another indication that many businesses remain in a difficult situation.

He outlined: “We’ve seen over a number of months how insolvency figures have improved, but this in turn has seen an apparent increase in ‘zombie’ firms – essentially companies teetering on the brink of such problems.

“This reported fall in ‘zombies’ is welcome, but in turn the research as a whole may reflect that businesses are now attempting to reduce their indebtedness to lenders rather than simply service their facilities. The consequence of this is additional pressure on cash in the business, as more of it is used for this purpose.

“It will be interesting to see how this situation develops over the coming months, but it is an unfortunate truth that if a full economic recovery is to be seen, some firms will have to fail in order for sectors to get back on their feet and begin to thrive once more.”

Read more about Irwin Mitchell's expertise in relation to Insolvency