Corporate Insolvencies Fall…But the Future is Uncertain for Zombie Companies

The Insolvency Service has recently released its latest figures showing that the number of companies entering into formal insolvency during the quarter ending June 2015 has fallen by 2.9% on the previous quarter. The 3,908 corporate insolvencies also represent a 7.5% drop in the number for the same period in 2014.

Despite this seemingly positive news for businesses in the short-term, experts are warning that certain financially-precarious companies are merely delaying the inevitable. It is thought that such “Zombie Companies” (companies that regularly struggle to meet their financial obligations and repay their debts) will suffer from the raft of changes that are on the horizon for businesses. Such changes include the long-awaited rise in interest rates, the increasing cost of raw materials, the recently announced introduction of a “Living Wage” and a strengthening British Pound. The fear is that such shifts will have detrimental consequences for those companies with very fragile finances. In this way, ironically, as the British economy grows, many businesses might fail.

If your company is facing tough financial challenges, then a confidential discussion – at an early stage – with an experienced and qualified specialist to talk through the range of options available may well be an appropriate course of action. Please contact us if you would like an initial consultation, free of charge.