Number of UK zombie firms falls

The number of businesses on the brink of going bust is falling at a record pace as a turnaround in regions outside London helps drive the recovery

The number of businesses on the brink of going bust is falling at a record pace as a turnaround in regions outside London helps drive the recovery, according to restructuring specialist Begbies Traynor.

A significant decline in businesses under “critical financial distress” across the North East, Yorkshire and Humberside and the East of England caused the figure to fall 39% in the year to June.

However, it warned that UK small and medium-sized enterprises (SMEs) continued to face significant risks, as sudden shocks could plunge them into financial difficulties even during a recovery period.

While the SMEs at risk have been labelled “zombies” in the past, as a result of their loss-making businesses being propped up by low-interest-rate loans, Begbies partner Julie Palmer said many were still “chronically under-funded”.

The construction, financial and professional services sectors – excluding law firms – are leading the recovery, according to the latest Red Flag report from Begbies.

Overall, the number of businesses experiencing critical financial problems fell to 3,001 at the end of June, compared with 4,947 a year earlier.

On a quarterly basis, the improvement continued with critical distress falling 9% from 3,283 in the first quarter of the year.

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