UK zombie business numbers fall in 2013, says R3

The number of 'zombie businesses' - those only able to pay the interest on their debts - has fallen to 103,000 from a peak of 160,000 in November 2012, according to research by R3, the insolvency trade body.

Liz Bingham, president of R3, said: 'While we have seen 'zombie business' numbers fall and stabilise, there hasn't been a corresponding rise in corporate insolvencies. Encouragingly, many struggling businesses will have used the unexpected grace period between recession and recovery to put their house in order, allowing them to spring "back to life".'

However, the research showed that there are thousands of businesses moving beyond 'struggling but surviving' into potentially dangerous territory.

The research shows a record 166,000 businesses were renegotiating payment terms with creditors while nearly 100,000 businesses said they would be unable to repay debts if there was a small increase in interest rates - the highest number of businesses in this position for over a year.

'Whereas zombie businesses can keep going for the time being, businesses in these latter two situations are approaching crunch time,' warned Bingham.

'Unfortunately, successfully negotiating new payment terms that work for both the creditor and debtor isn't always possible.

'A genuine spike in insolvencies may now be unlikely, but there could well be a prolonged period where corporate insolvency numbers are higher than where they might typically be, so long after a recession.'

The number of 'zombie businesses' - 103,000 - is equivalent to 6% of UK businesses with a turnover of over £50,000.

A stuttering recovery, government support schemes, creditor forbearance, and low interest rates have helped keep otherwise unviable businesses afloat.

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