Covid business support has prolonged the life of many ‘zombie’ companies in the UK and elsewhere – moribund businesses that will likely fail in large numbers as financial support is withdrawn.
Zombie companies were already widespread in the UK prior to the pandemic after years of low interest rates resulting in very cheap debt. The number of companies that are unable to do anything more than service their debt has, however, grown sharply over the last 18 months.
Financial support has actually been funding companies that would otherwise have failed or realised their time was up long ago
The latest accounts for every legal entity registered in the UK and filed at Companies House do not yet fully reflect the impact of coronavirus, but they do offer an insight into the effects of lockdown on ‘undead’ enterprises.
Nick Hood, senior adviser at Opus Business Advisory Group, analyzed these figures in September, applying a minimum negative balance sheet limit of £20,000 to filter out businesses with insignificant shortfalls. He found that there were 234,718 zombie companies in the UK – accounting for almost 6% of all active companies and an increase of 46% over the same period last year.
“The
