According to the Association of Business Recovery, R3, the number of zombie businesses in the UK has fallen by 57,000 since November 2012. There has been a lot of press in the past about companies who are just managing to stay afloat by only paying off interest on their debts. Now, it appears the number has fallen from 160,000 to 103,000 over the last couple of months.
R3 believe the reason for this was the ‘grace period’ given to small companies after the recession to recover, so they could rebuild their foundations and get back to profiting.
However, many small businesses are still feeling the strain and are in talks with their creditors to help stay on top of debt. If interests are to go up anytime soon, R3 has said that 96,000 businesses would be unable to pay debt back.
Falling into debt is a very real risk, so it’s important for those starting to struggle to act immediately to try and find a way forward before it’s too late. It may be the case that the business needs to restructure or adapt to a new cashflow model, or more formally, use a Company Voluntary Arrangement to protect the business against aggressive creditors and pay back the debt over time.