Rising interest rates and spiraling debt payments to crack down on UK zombie companies, top insolvency expert predicts
Britain’s army of ‘zombie’ companies appears destined to be wiped out by rising interest rates, a leading insolvency expert has predicted.
Begbies boss Traynor said debt-plagued companies will not survive as rates rise to bring inflation back under control, ending the zombie epidemic.
Until now, these companies have only stayed alive thanks to years of low borrowing costs.
But with interest rates now at 5 percent, down from 0.1 percent two years ago, and set to rise further, its future looks bleak.
“Over the next 18 months, we’re going to see virtually all of them eventually come to an end,” Begbies Traynor Chief Executive Ric Traynor told Bloomberg.
Boom time: Begbies Traynor boss Rick Traynor (pictured) said debt-ridden companies will not survive as the Bank of England raises rates to tame inflation
“We’ve seen an increase in activity from smaller businesses over the last year because they tend to be the first to hit when there’s a problem.
“Now we are moving towards mid-market companies.”
The comments came as Begbies Traynor reported an 11 per cent increase in annual revenue to £121.8m as insolvency cases increased.
With a 50% increase in profits to £6m, it increased its dividend for the sixth consecutive year.
Russ Mould, chief investment officer at stockbroker AJ Bell, said: ‘Begbies Traynor tends to thrive when economic conditions are bleak.
Many businesses have reached a tipping point where they can’t generate enough cash to repay the loans and have no choice but to pull out.