Number of ‘zombie businesses’ on the rise

Picture: Malcolm Wells

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THE number of ‘zombie businesses’ in the south east has increased dramatically in the last nine months from 5,000 to 23,000.

Insolvency experts warn the figures suggest the economic recovery is putting pressure on some businesses rather than making their lives easier.

Experts from the southern committee of R3, which brings together insolvency practitioners from local accountancy, legal and recovery firms, say thousands of businesses risk getting stuck in a state of limbo where they are still in business but with little chance of growth.

Zombie businesses are defined as those that can only pay off the interest on their debts rather than paying off the debts themselves.

Andrew Watling, chairman of the southern committee of R3 and a director at Quantuma in Southampton, said: ‘Making the minimum payments on debts or renegotiating payment terms with creditors can free up some extra cash and buy some time, but it’s not a long-term solution. Healthy cash flow is critical.’