Are zombie firms threatening a productive economy?

18 November 2013

The threat of ‘zombie companies’ is in the news yet again, with research by The Adam Smith Institute indicating that 108,000 firms are only just breaking even. The think tank believes these zombie companies stop the productivity of the economy by preventing new, dynamic businesses entering the market. The institute claims that investment and labour should be restructured to support up and coming businesses, to avoid a delay in the UK’s recovery.

Low interest rates and the banks’ priorities are said to be part of the blame for firms standing still with reports further showing a fall in insolvencies. This shows that fewer firms have the opportunity to be restructured and turned around to reach a profitable stage.

We believe that many zombie firms are viable, especially if they have survived the last few years of a struggling economy. The threat of zombie companies can be seen as overstated; with the right management, help and guidance, businesses can become profitable. We advise companies ensure there is effective financial management in place, with a daily or weekly cashflow model providing up-to-date records and procedures.

As turnaround specialists, we can help revaluate and restructure your company to offer on-going solutions and hopefully improve profit margins. Have a look at our directors’ tool kit for businesses - you can download our cashflow template here.