Don’t be a Zombie!

April 20th, 2017

139,000 businesses in the UK are only paying the interest on their debt and not repaying the debt itself, according to new research by insolvency and restructuring trade body R3.

The number of businesses in this position – equivalent to 8% of all UK businesses – has returned to levels more in line with previous years after falling to 69,000 last year (4%).

Only paying off the interest on debt is often a sign of a ‘zombie business’ – a business only surviving because of low interest rates – but R3 says the new figures do not necessarily indicate a return of the ‘zombie’ phenomenon.

Martin Williamson, of ipd, said: “It is likely that some businesses are taking advantage of record low interest rates to keep cash in their business.

“But, where companies are genuinely struggling to pay off their debts, it is important that they get advice as soon as possible.

“Businesses may run into trouble when interest rates start to rise again or if fresh borrowing is needed to cope with a downturn in fortunes, especially if businesses are already borrowing at their limit.”