Rising interest rates and rising debt payments will wipe out Britain’s zombie firms, top insolvency expert predicts
Britain’s army of ‘zombie’ firms appears to be wiped out by rising interest rates, a leading insolvency expert predicted.
Begbies boss Traynor said the debt-riddled companies will not survive if rates rise to bring inflation back under control – ending the zombie epidemic.
Until now, these companies have only been kept alive thanks to years of cheap borrowing costs.
But with interest rates now at 5 percent – up from 0.1 percent less than two years ago – and set to rise further, their future looks bleak.
“In the next 18 months, we’ll see pretty much all come to an end,” Begbies Traynor executive chairman Ric Traynor told Bloomberg.
Boom: Begbies Traynor boss Rick Traynor (pictured) said debt-riddled companies won’t survive if the Bank of England raises rates to bring inflation back under control
“We have seen an increase in activity from smaller companies over the past year, as they are often the first to be affected when there is a problem.
“We are now going to mid-market companies.”
The comments came as Begbies Traynor reported an 11 per cent increase in annual revenue to £121.8 million as insolvencies increased.
With profits up 50 per cent to £6 million, it increased its dividend for the sixth year in a row.
Russ Mould, director of investment at stockbroker AJ Bell, said: ‘Begbies Traynor tend to thrive when economic conditions are bleak.
Many companies have reached a tipping point where they cannot generate enough cash to pay off loans and have no choice but to fold.”