Partner Article

Accountants issue simple guide to help companies

Bosses of the legions of so-called “zombie” businesses, which are stagnating the UK’s economy need to assess their business and see if it has a viable future, advisers at leading accountancy firm Waltons Clark Whitehill have said.

According to new research, zombie firms – defined as companies who can only pay off the interest on their debts, but not the actual debt itself – have risen by ten per cent to 160,000 nationally, prompting the North East accountancy firm to issue a warning to firms which have fallen into this financial mire that they must seek help – and fast.

Many analysts are concerned that zombie firms spend so much of their money servicing interest payments, they are unable to invest in the company or attract new finance, and the growing number of zombie firms could be partly responsible for the UK’s weak economic recovery.

Experts at Waltons Clark Whitehill have called for the leaders of zombie firms to seek professional advice quickly.

Heather O’Driscoll, Managing Partner, said: “Firms which operate in this way are in an extremely precarious position as they have very little financial flexibility, which means any increase in costs could push them over the brink and into insolvency.

“Although a lot of this type of business could theoretically continue to exist for a number of years, zombie companies are likely to stagnate the economy as they simply do not have the money to be able to invest in equipment or training for staff, which means their chances of growth are virtually non-existent.

“Directors of firms which are clinging on in this way need to seek professional financial advice – and quickly. They need to have a serious look at every aspect of their business, assess what is going wrong, and then make what may be a difficult decision about whether the company has a viable and solvent future.”

This was posted in Bdaily's Members' News section by George Hardey .