‘Zombie businesses’ on the edge

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According to research, some 3,000 businesses in the south west are “teetering on the edge” and struggling to pay their debts.

These so called ‘zombie businesses’, says insolvency trade body, R3, are only able to pay the interest on their debts, but not able to reduce the debt itself.

Ross Connock, vice chair of the R3 south west and Wales region, said: “3,000 businesses in the south west are only able to pay the interest on their debts but not reduce the debt itself – this is a staggering number.

“The implication here is that these businesses have been ‘running on empty’ for quite some time now and with no reserves left in the tank, they may not be able to carry on for much longer.”

According to R3, nationally the retail sector has the highest proportion of businesses that will be unable to pay their debts in the event of a rise in interest rates – 18%, which equates to 31,000 businesses. However, the construction sector has the largest proportion of businesses that are only able to pay the interest on their debts – 16%, which translates to 37,000 UK businesses.