Mark Carney has only just taken up residence at the Bank of England and already he sees the Government talking up the economy. George Osborne has called it for the Coalition. The economy has turned the corner and the austerity argument is won.
Confidence, that most important element of our economy, may be returning and Mr Carney has done his bit by pledging to freeze interest rates until there is a fall in unemployment by 750,000 - his forward planning. There have been definite signs of growth and an old "friend" has returned - the rising housing market. Sellers are being tempted to re-enter by increased prices and already there is comment of it reaching dangerous bubble-like levels.
So what of the zombie business? Beloved of numerous article writers who dig out their favourite Michael Jackson ‘Thriller’ photograph to accompany their piece, these businesses are best described as being on life support, existing only to meet the interest payments on their debts, and are criticised for taking up market share that might be better exploited by other companies who do have the drive and investment opportunity.
Figures show that the number of zombie businesses is finally declining. In a climate where the economy is showing signs of a sustained recovery, there is less of an appetite to allow these businesses to tick along. Either creditors are satisfied that the debtor has a viable business model or they are not. Banks are also under regulatory pressure to recognise bad debts and to end forbearance. Time is being called on those businesses that do not have survival prospects.
This has consequences both in terms of the companies themselves (and the rise in insolvencies) but also the knock-on effect for the businesses with whom they trade. Either way, there are issues to be dealt with.
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For further information on this topic, please contact:
Laurence Weeks
Partner
Restructuring and Insolvency
laurence-weeks@birketts.co.uk
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