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Tuesday, 16 July 2013

Zombie Businesses fall linked to lower insolvency rates

The number of so called "Zombie Businesses" has been declining significantly in the last quarter when compared to the same quarter last year.

According to Red Flag Alert, the research service for Begbies Traynor, levels of ‘critical’ financial distress among UK businesses have fallen 39% compared to Q2 2012.  This is a significant fall in numbers.  The decline from Q1 of this year was 9%.  Interestingly the fall has been seen across all sectors of the economy with food and leisure performing particularly well.

Critical problems by sector:
SectorQ2

2012
Q2

2013
%

Change
Q1

2013
Q2

2013
%

Change
Automotive12783-35%9183-9%
Bars &  Restaurants223172-23%13517227%
Construction988516-48%630516-18%
Financial Services8660-30%8460-29%
Food & Bev Manufacturing      

Beverage Manufacturing
2614-46%2214-36%
Food Retailing6444-31%43442%
General Retail244179-27%1681797%
Hotels384313%314339%
Ind Transport  Logistics                11565-43%6765-3%
Leisure3723-38%3823-39%
Media8759-32%6759-12%
Other Manufacturing246222-10%2082227%
Others305127-58%1221274%
Printing &  Packaging3422-35%2422-8%
Professional Services15864-59%6664-3%
Real Estate326229-30%2272291%
Spors &  Recreation3324-27%3424-29%
Support Services264153-42%169153-9%
Telecoms & IT124102-18%110102-7%
Travel Tourism6032-47%4432-27%
Uncoded1,206640-47%785640-18%
Utilities38167%48100%
Wholesaling153120-22%1141205%
All Sectors4,9473,001-39%3,2833,001-9%

Critical distress is defined by serious delays in processing payments and outstanding legal actions by creditors.  In addition the alert service monitors the general financial health of the companies by monitoring their results posted at Companies House.

The economy has certainly been improving over the last few months which is reflected in these figures. However, still the greatest risk to small companies is the lack of finance.  There are many alternative forms of finance out there that are not attached to the main banks.  See this page on finance for details.

Alternatively if the business is really struggling then a CVA or company voluntary arrangement is often the best solution as a proportion of the debt can be written off.


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Many thanks for your comments. If you have a private business problem and you want advice give us a call on 0800 9700 539 or email me at keiths@companyrescue.co.uk. If you are a professional advisor with a troubled client, please suggest they visit www.companyrescue.co.uk or contact me as above.

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