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Zombie business numbers fall to record low in the region

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The share of East of England companies only paying the interest on their debts – so-called ‘zombie’ businesses – has dropped to a record low of just 46,000 firms. The proportion fell to 2 per cent in December 2017 down from 18 per cent last April and one of the sharpest falls in any UK region, according to figures from the Eastern branch of R3.

Other signs of acute distress firms in the region have also dropped; just three per cent say that they are struggling to pay debts when they fall due, while only 1 per cent say they would be unable to repay debts if there were a small increase in interest rates. R3 Eastern chairman Mark Upton, a partner at Ensors Chartered Accountants in East Anglia, said: “The fall in businesses only paying the interest on debts comes despite the first rise in UK interest rates in a decade. However, it may be that November’s modest rate rise concentrated directors’ minds and, with the prospect of further rises in the near future, prompted businesses to deleverage or refinance to avoid future struggles.

An additional factor could be that, with corporate insolvencies edging upwards over the last 18 months, some of those companies struggling previously have ceased to trade or gone through a rescue process." He added:“The downward trend in zombie businesses does not mean, however, that they will completely disappear. Those companies which have refinanced may not be any more productive and may have put problems off for a later date, while a serious financial downturn could easily create a new group of ‘zombies’."

Last Updated ( Thursday, 15 February 2018 10:52 )