A new report from insolvency practitioners Begbies Traynor, based on analysis of their ‘Red Flag Alert’ dataset, reveals that as many as one in seven UK businesses are Zombies. This means that in real terms, more than 400,000 UK businesses are only generating enough cash to service their debts and keep their creditors at bay – an almost 16% rise since 2010! The sectors highlighted by the report were mostly service based – companies which have traditionally had low levels of assets to fall back on in times of reduced trading. These companies are barely clinging to existence by making the most of historically low interest rates and increased creditor forbearance, but these lenient climate will not continue indefinitely.
These companies are incapable of surviving under regular market conditions – if interest rates start to rise before trading picks up, thousands are likely to be closed within months. Unable to attract enough investment to clear their debts, these companies will require urgent attention if they are to survive as interest rates rise. They are limping along, capable of surviving, but unable to operate properly due to the lack of cash to invest/
If you recognise your business in this description, then you need support and advice on how to save your business. Rather than waiting for interest rates to rise and the bank to pull the plug, why not get specialist advise on how to return your company to life. One client of ours, a property developer just outside Oxford, had run up nearly £500,000 of debt before the financial crisis, but when the crisis hit, his bank refused to continue lending to allow him to develop his main site, leaving him in financial limbo. The client felt trapped, and came to us to find a solution to get out of the situation.
The rapid plunge in commercial property values has played it’s part in the rising numbers of zombie companies, but these companies need to be saved in order to protect the wider economy. If weaker businesses are allowed to continue without improvements being made, then the economy will suffer as weaker business models stack up and growth is reversed.
Here at Isis Business Brokers, are fully capable of analysing a zombie business, targeting the weakest areas for improvement and developing the strongest in order to improve cash flow and help reduce debts. If you feel trapped by the burden of debt payments, or have other concerns about your business performance, call us now on 01865 784462