The number of firms going bust is set to soar as banks pull the plug on thousands of “zombie” companies unable to pay their debts, experts warned today.
The forecasts came after the latest rise in corporate insolvencies to 4,303 during the first three months of the year, up 4.3% on a year earlier and the highest number since the end of 2009.
David Birne, of accountants HW Fisher, said: “There are still thousands of ‘zombie’ companies which are stumbling on, as banks are reluctant to push all but the basket cases into insolvency. Banks are showing remarkable levels of forbearance, sometimes even with the firms that are dead from the neck up – and with little prospect of clearing all their debts.”
The number of failures was only marginally higher than the previous quarter, but experts said that firms had been cushioned by record low rates and growth was weak.
Ian Gould, head of corporate recovery and insolvency at PKF, warned: “The numbers mask the fact that businesses throughout the economy are vulnerable. It will only take an increase in interest rates, a change in the attitude of bank managers or another eurozone shock to start the dominos falling.
“We’re experiencing the calm before the storm. We’ve seen the economy enter what appears to be a double dip recession, the manufacturing sector is under pressure and there is no indication of any significant relaxation of the financial squeeze.”
