The number of ‘zombie’ firms operating in the UK is starting to fall in accordance with economic recovery, according to latest figures from R3 (Association of Business Turnaround Professionals).
A fall from 160,000 in November 2012, has reduced to approximately 103,000, although it is believed that ‘zombie’ firms now negotiating debts with creditors has increased.
R3 president Liz Bingham said: “The decline of ‘zombie businesses’ – without a significant impact on corporate insolvency numbers – is welcome.
“Many businesses that previously fell into this category will have used low interest rates and the extended gap between recession and recovery to move to surer financial footing.”
Despite the decrease in firms just meeting interest on borrowings, there was a significant increase in the number of businesses that are negotiating repayment terms with lenders.
Bingham believes these increases are a cause for concern.
She explained: “It’s a positive that business are taking action and addressing their problems by talking to their creditors.
“But, unfortunately, successfully negotiating new payment terms that work for both the creditor and debtor isn’t always possible.
“It is also particularly worrying that so many businesses are concerned about the impact of interest rates on their ability to meet their debt obligations.
“With so many businesses still in a difficult financial situation, it is important that policy makers tread carefully.”
Source: Insolvency News