The apparent ‘recovery’ of the UK economy is having knock-on effects that could drive many companies into needing administration advice.
Figures from R3 – the Association of Debt Recovery Professionals show that 154,000 UK firms are now so-called ‘zombie businesses’.
This is the term used for those that are just able to cover essential outgoings like repayments on business debts, but would not survive any sudden or major financial shock or business interruption.
In comparison, in November 2013 that same figure was just 103,000, showing that for many firms the real-terms trading conditions have worsened.
Why is this when the economy as a whole is improving? R3 president Giles Frampton says it’s a common consequence of the emergence from recession.
“The first flush of growth generated plenty of cash for businesses but now some are experiencing the side-effects of growth too,” he said.
“Over-trading and late payment can easily put businesses with bulging order books in a position where cash flow becomes a major headache.”
Those who have tried “to run before they can walk” may have over-stretched their finances – leading to a need for administration advice as a consequence.