Crunch time for ‘zombie businesses’

R3, the professional association for insolvency, business recovery and turnaround specialists in the UK, reports that there are now 108,000 businesses in the UK only capable of paying off the interest on their debts, down from 146,000 in June last year, and well down from the peak of 160,000 last November. This decline has been matched by a rise in the number of businesses reporting even more acute signs of business distress.

137,000 businesses now report having to negotiate payment terms with their creditors, up from 130,000 a year ago, whilst 134,000 businesses are struggling to pay their debts when they fall due, up from 110,000 in June 2012.

With the climb in businesses with potentially terminal cash flow problems, and the economy finally showing signs of a sustained recovery, it will soon become clear to creditors which of their struggling debtors have a viable business model, and which don’t.