Struggling companies, barely able to meet their debts and surviving only with the indulgence of their lenders and other creditors have long been an unwelcome negative feature of both the UK and the global economy. They distort competition, force down prices and keep precious financial resources from being allocated to healthier and more productive enterprises.
We have carried research using the database and analytics of the financial health monitoring specialists, Company Watch, looking at every UK-registered entity with a negative balance sheet where its liabilities exceeded its assets by at least £20,000.
The outcome has been some startling headline numbers. There are currently some 235,000 such zombie companies, of whom only 161,000 had negative balance sheets a year earlier, so that 46% of them appear to have succumbed to the financial pressures of the pandemic and yet are still out there, stumbling along causing mayhem in the commercial world.
They have combined ‘negative equity’ of £355billion, which is the minimum potential shortfall for the creditor community should they all fail, which of course they won’t. If only 10% did, the dramatic impact can clearly be seen. Their debt to lenders is £512billion, which is the amount of unproductive lending capacity tied up in these enterprises.
Most startling of all is the figure for their total assets, which is measure of the dead capital and resources that could otherwise be re-deployed to more innovative businesses, more likely to invest to generate wealth and create jobs. This number is just under £1trillion.
We will be looking at this research on a regional basis within the UK over the coming weeks.
In the meanwhile, we have worked with Financier Worldwide to put together our thoughts on the origins, implications of and potential solutions to this zombie companies phenomenon both in the UK and across the world.
To read the full article, you can download a copy by clicking on the image below or click on this link to be taken to the article on Financier Worldwide’s website.
