THE UK’s hordes of “zombie” businesses need access to specialist help rather than being left to fail, an insolvency professional has said.

It has been estimated that 21 per cent of Britain’s businesses are “zombie companies” – meaning they are only making enough money to keep going and service their debts.

Carl Faulds, managing director of restructuring specialist Portland Leonard Curtis, which has offices in Poole and Fareham, said: “The Covid pandemic has brought ‘zombie’ businesses back into sharp focus, with concerns that the conditions created by the government’s response to the economic crisis has greatly increased the number of them.”

The help introduced at the height of the Covid pandemic – including £75billion in government-backed loans and £70bn of furlough support– kept many businesses going,

But two recent reports – from the Resolution Foundation and Onward – have both warned of a new wave of zombie businesses, with Onward estimating that 21 per cent of UK firms now count as zombies.

As recently as 2018, the insolvency and restructuring trade body R3 was reporting the lowest ever incidence of zombie companies, at less than three per cent.

Mr Faulds said: “While, pre-pandemic, many might have argued that these failing enterprises should be dead rather than lumbering on, the sheer numbers of companies potentially facing that issue today make that totally unrealistic.

“An alternative view we believe is that any functioning business – albeit doing so without making any money – can have a positive role to play somehow within the SME ecosystem. If they’re providing a product or service to another company, they must have a purpose and reason for being. 

“There are steps that can be taken and support that can be given to breathe life back into them. More often than not, there is a business of value – despite the absence of profits and lacklustre financial performance – and there is space in the market for it.”

He said steps that could be taken included restructuring, sale of assets and mergers or acquisitions for less profitable businesses in a supply chain.

“We often look for suitable funders or provide support to chase any outstanding invoices and debts. In addition, we will work out why a client’s business isn’t making any money despite turnover levels remaining healthy,” he added. 

“It usually comes down to being sufficiently aware of what the numbers are coming into and out of the business. And to moving quickly when the sums don’t add up.”