Are zombie companies facing a cliff edge on October 1st?

By Opus Restructuring & Insolvency

20 Sep 2021

imc-headshot.jpg

As the full effects of the Coronavirus pandemic began to be felt last March many anticipated a significant rise in formal insolvency appointments as companies grappled with the difficulties of a loss of revenue and a need to meet fixed costs.

The insolvency and restructuring industry braced itself for an increase in work not seen since the financial crisis in 2008. However, thanks in no small part to the Government support measures put in place, this increase has not yet materialised. In fact, 2020 saw the lowest number of insolvency appointments since 1989 and industry predictions of increased volumes have been repeatedly pushed back as the pandemic and corresponding support measures continued. To coin a phrase, it seems fair to say the Government has succeeded in ‘flattening the curve’ of financial distress.

Yet as the country continues to reopen and support measures are withdrawn it appears a spike may be just around the corner. The final elements of furlough are scheduled to be withdrawn on September 30th. The following day the ban on winding up petitions is lifted (subject to a minimum debt threshold of £10,000 and excluding commercial rent arrears) allowing creditors to pursue for payment via the courts in a much more aggressive manner. In addition, as repayments fall due on Bounce Back Loans and CBILS many struggling companies may began to find themselves squeezed by a number of factors.

The high proportion of zombie companies in the UK, those that do not record a profit or contribute meaningfully to the economy, has been widely reported to have increased during the pandemic. A report by the thinktank Onward in April 2021 estimated as many as 20% of companies meet this classification, an increase from 16% prior to the pandemic. Data taken from Company Watch shows that the position in Lancashire is stark as an estimated 10,211 companies are believed to be zombie companies. The figure in 2020 was 6,715 and the current level represents a 52% year on year increase in zombie companies. These companies may struggle to recover from this position once support measures and protection are withdrawn and a cliff edge looms large for a number of companies on October 1st.

Corporate failure isn’t however a certain consequence to these difficulties and companies in financial distress may still be able to resolve their position by taking early advice from an insolvency practitioner. Much will depend on the stance taken by HMRC and other creditors and how pragmatically they approach overdue debts. There will be a range of options available for distressed companies, but the main considerations will be the need to keep a tighter than ever rein on cashflow controls and to assess the likely market in their specific industries. If future trade is anticipated to be positive this may enable companies to reach appropriate plans to deal with their historic debt and recover from their zombie status. 

As directors if you are facing financial difficulties as support measures are withdrawn it is important to take early advice from a licensed insolvency practitioner whilst restructuring options are available. A consultation can be arranged with Ian McCulloch at Opus Restructuring & Insolvency by calling 07854 031177 or e-mailing [email protected]

Latest news

1

University of Central Lancashire celebrates hat-trick of wins at Educate North Awards University of Central Lancashire winners at Educate North Award Winners 2025

University of Central Lancashire celebrates hat-trick of wins at Educate North Awards

04 Apr 2025

2

The Villa’s sister venue shuts its doors The Villa Levens and The VillaWrea Green (Image credit: The Villa Levens and The Villa Wrea Green)

The Villa’s sister venue shuts its doors

04 Apr 2025

3

PM urged not to retaliate over tariffs Manufacturing

PM urged not to retaliate over tariffs

03 Apr 2025

4

CMAC Group appoints Matthew Ratcliffe as chief operating officer Matthew Ratcliffe CMAC

CMAC Group appoints Matthew Ratcliffe as chief operating officer

03 Apr 2025

5

For sale signs at The Villa Villa Wrea Green has been brought to market (Image credit: The Villa Wrea Green)

For sale signs at The Villa

02 Apr 2025

Pc Prestonmacan Gif980x120 March
Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
Lancashire Net Zero Carbon Conference
Net Zero Carbon Social 1200px
Networking
18 Jun 2025

Lancashire Net Zero Carbon Conference

Crow Wood Hotel & Spa Resort, Burnley, BB12 0RT

08:30 - 13:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

RISE - The Academy for Female Leaders and Managers
WENDY BOWERS RISE Illustrstion copy.jpg.jpg
LBV Hub Seminars
02 Apr 2025 - 08 Oct 2025

RISE - The Academy for Female Leaders and Managers

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:00 - 15:30

Lancashire Business Expo 2025
https---cdn.evbuc.com-images-880395853-4862066883-1-original.20241022-091152-2.jpeg.jpg
LBV Hub Exhibitions
04 Apr 2025 - 04 Apr 2025

Lancashire Business Expo 2025

Sir Tom Finney Sports Centre, Preston, PR1 2HE

09:00 - 15:00

The Business Network Central & East Lancashire
LBV Hub Networking
24 Apr 2025 - 24 Apr 2025

The Business Network Central & East Lancashire

Stanley House, Blackburn, BB2 7NP

11:30 - 14:15

People Power: Exclusive Event Series
Stay ahead in 2025.jpg.jpg
LBV Hub Seminars
29 Apr 2025 - 29 Apr 2025

People Power: Exclusive Event Series

People's History Museum, Manchester, M3 3ER

17:00 - 21:00

Planning for the future + navigating Inheritance Tax changes
Planning for the future + navigating Inheritance Tax changes for website.png.png
LBV Hub Seminars
01 May 2025 - 01 May 2025

Planning for the future + navigating Inheritance Tax changes

Stanley House Hotel, Mellor, Blackburn, BB2 7NP, Blackburn, BB2 7NP

08:00 - 10:30

A night at the races
1.png.png
LBV Hub Dinners / Balls
02 May 2025 - 02 May 2025

A night at the races

Morecambe FC, Morecambe, LA4 4TB

19:00 - 23:59

Innovating business solutions through PhD Partnerships
30478 Skills Bootcamp open day setting.jpg.jpg
LBV Hub Networking
07 May 2025 - 07 May 2025

Innovating business solutions through PhD Partnerships

University of Central Lancashire, Preston , PR1 2HE

14:30 - 15:30

Celebrating 50 years of KTP
UCLanAerialCampus.jpg.jpg
LBV Hub Networking
07 May 2025 - 07 May 2025

Celebrating 50 years of KTP

University of Central Lancashire , Preston, PR1 2HE

16:00 - 18:00

Research and Knowledge Exchange Showcase
13421_research_knowledge_exchange_2025_600x300.jpg.jpg
LBV Hub Awards
07 May 2025 - 08 May 2025

Research and Knowledge Exchange Showcase

University of Central Lancashire , Preston, PR1 2HE

09:00 - 17:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more Lbv121 Online Graphic
Subscribe now

Weekly news bulletin