North-East sees fall in "zombie" firms, bucking national trend

MORE than one in ten North-East firms is in a parlous position, but the region is faring better than the national average for so-called zombie firms, research has found.

Since the summer, the region has seen a slight drop in the number of firms which are teetering on the edge of insolvency but still able to hang on, according to report by insolvency trade body R3.

Signs of a zombie company are being able to afford to pay interest on debts, but not the loan itself; struggling to pay debts when they fall due; having to negotiate payment terms with suppliers; and believing that, in the event of a rise in interest rates, the business will be unable to pay its debt at all.

According to the new research, 12 per cent of firms in the North-East and Yorkshire and Humberside are experiencing one or more of these concerns, compared to the 17 per cent figure recorded back in July.

This compares to a 10 per cent rise nationally over the same period, equating to 160,000 companies.

Steve Ross, chair of R3 in the north east and a director in the corporate recovery department of the Sunderland office of accountancy firm RSM Tenon, said: “It’s clearly good news that our region is doing a little better than the national average, and despite the prevailing tough climate, there are clearly still many companies here that are winning new business, creating jobs and looking optimistically towards a bright future.

“However, this shouldn’t mask the fact that there are also many thousands of regional firms which, more than four years after the start of the economic downturn, are only just managing to keep going, and the constant danger they face is that even a minor change of circumstances, such as a small rise in interest rates or suppliers changing their terms, could mean that they’re not be able to hang on any longer.”

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