Surging interest rates are set to eliminate all of the UK’s “zombie” companies over the next 18 months, according to a new forecast. The prediction comes as insolvencies in England and Wales have reached a 14-year high amid rising energy bills, interest rates and labour costs, as well as falling consumer confidence.
With levels of distress continuing to rise, insolvency practitioner Begbies Traynor has said that rising interest rates will wipe out essentially all of the UK companies struggling with unmanageable debts by the end of 2024.
Speaking to Bloomberg, Begbies Traynor Chief Executive Ric Traynor said: “Over the next 18 months, we’ll see virtually all of them finally come to an end.”
Concerns around “zombie” companies – businesses that have managed to avoid insolvency despite struggling to service their debts – have been mounting since the COVID-19 pandemic, when government-backed loans helped to prop up thousands of UK businesses. Combined with limitations imposed on creditor actions such as winding-up petitions, this saw insolvency rates plummet despite the economic chaos caused by the pandemic.
However, these protections have since been withdrawn and businesses are now faced with having to pay back debts in an increasingly hostile trading environment, with inflation soaring, costs rising across the board, supply chain issues persisting and the cost of living crisis pushing consumer sentiment and spending down.
Amidst all of this, Begbies Traynor – which is reported to have an 11 per cent share of the UK administrations market – has seen double-digit annual revenue and profit growth following soaring demand for insolvency services.
Ric Traynor added: “Our insolvency team will benefit from their recent insolvency appointments and increased order book, together with anticipated further growth in the insolvency market.”
“We’ve seen an increase in activity for smaller companies over the last year because they tend to be the first ones that are hit when there’s a problem. We’re now moving into mid-market companies.”
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