max temp: 16°C

min temp: 15°C

ESTD 1874 Search

East Anglia: Insolvency body R3 warns of renewed increase in the number of ‘zombie’ firms

13:13 07 January 2014

Shay Lettice of Peters Elworthy & Moore, east region chairman of R3

Shay Lettice of Peters Elworthy & Moore, east region chairman of R3

Roger Adams Photographer 2011

The number of “zombie” businesses those only able to pay the interest on their debts – has risen sharply in the East of England over the past six months despite the upturn in the economy, according to a report by insolvency trade body R3.


The total of around 23,000 businesses in the region which are keeping up with interest payments but unable to reduce the amount they owe remains well down on the figure of 55,000 recorded 18 months ago but is now around double the level in R3’s last survey in the middle of 2013.

The research also shows a six month rise from 5,000 to 15,000 in the number of businesses in the region saying they were negotiating payment terms with creditors, although again this represents a decrease of 11,000 compared with 18 months ago.

Meanwhile, the number of local businesses in the region reporting that they would be unable to keep up with their debts if interest rates were to increase now stands at around 20,000.

R3 eastern region chairman Shay Lettice said zombie businesses were the chief beneficiaries of the “relatively benign” trading environment of recent years, characterised by low interest rates and forbearance on the part of many lenders, which had resulted in a smaller number of corporate insolvencies compared with previous recessions.

“Although the number of businesses showing ‘zombie’ characteristics has fallen in the long-term, there hasn’t been a corresponding rise in corporate insolvencies, which is encouraging,” he said.

“Many businesses that were struggling 18 months ago will have used the unexpected grace period between recession and recovery to put their house in order, allowing them to spring back to life.”

However, Mr Lettice, a partner at Cambridge accountancy firm Peters Elworthy & Moore, said that Zombie businesses which did not manage to recover their footing were bound to fail at some point, perhaps as their reserves became depleted or as their creditors ran out of patience.

Another possible factor behind the recent increase in zombie businesses was the adoption by HM Revenue & Customs of a “real time” approach to gathering information, which could also be putting more pressure on some firms.

“The increase in organisations having to negotiate payment terms with creditors, combined with the relatively large number worried about struggling should interest rates rise, indicates that some businesses are now moving beyond ‘struggling but surviving’ into potentially dangerous territory,” added Mr Lettice.

“It’s a positive that businesses are taking action and addressing their problems by talking to their creditors and this could help stave off a future spike in corporate insolvencies.

“We could, however, see a prolonged period in which the number of corporate failures is higher than might be expected so long after a recession.”



Dan Poulter with employees at B&Q

A Suffolk MP has said he will do what he can to try and prevent a B&Q store closing down with the potential loss of around 100 jobs.

Helen Drage,  co-founder of Drage & Tozer Opticians.

Sudbury opticians firm Drage and Tozer, founded in 1995 by Helen Drage and Sandra Tozer, has celebrated 20 years in business by expanding into new premises.

Val Carrol, director of healthcare at Beckett Financial Services, receives the company’s Commendation at the Investment Life & Pensions Moneyfacts awards from comedian Tim Vine.

Bury St Edmunds-based Beckett Financial Services has been recognised by a national financial services publication for delivering outstanding levels of customer satisfaction to its healthcare clients.

Meadows Montessori School pupils Spencer, Luke and Ben, aka the Flower Pot Men, with The Apprentice 2014 winner Mark Wright who presented their trophy for winning the Best Community Engagement category of the Fiver Challenge Awards , supported by Virgin Money.

Pupils from the Meadows Montessori school in Ipswich have been named among the winners in the Fiver Challenge, run by the Young Enterprise programme.

From left, Michael Francis, store manager, Colchester, Robert Smith, dealer principle, Colchester and Norwich, and  Emmanuel Greffier, store manager, Norwich with the Bang & Olufsen UK Partner of the Year trophy.

The team at the Bang & Olufsen store in Colchester is celebrating after beating off competition from 60 other dealerships to be named as the audio equipment firm’s UK Partner of the Year.

Kelly-Anne Byres of Poppy Nursing and Care Services.
Picture: Stephen Waller  www.stephenwaller.com

Five businesses and organisations from Suffolk and north Essex have been named among the finalists in the 2015 East of England Business Champions awards.

The Nestle Purina site in Sudbury

A Sudbury pet food factory is under increasing pressure to tackle foul odours as it is revealed an environmental regulator recorded 40 stench complaints since last month.

Ipswich Building Society general sales manager Jo Leah and her friend Libby Smith, also from Ipswich,preparing for their charity challenge involving a 100km trip down the Zambezi River.

A executive from Ipswich Building Society will today be starting a challenge to travel 100km along Africa’s Zambezi River in aid of a local charity.


Fairline testing facility at Ipswich.

The new owner of Fairline Boats has expressed confidence in the business, despite laying off more than 100 of its production staff.

Mark and Tessa Riley, of Riley and Riley Jewellers in Ipswich, were runners-up in the Ipswich Independents business competition.

The finalists in the Ipswich Independents Award 2015 have been announced.

Most read

Most commented

Topic pages