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Yet as the country continues to reopen and support measures are withdrawn it appears a spike may be just around the corner. The final elements of furlough are scheduled to be withdrawn on September 30th.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 These companies may struggle to recover from this position once support measures and protection are withdrawn and a cliff edge looms large for a number of companies on October 1st.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

Lockheed Martin Skunk Works and BAE Systems’ FalconWorks announce strategic collaboration Collaboration between BAE Systems FalconWorks and Lockheed Martin Skunk Works

Lockheed Martin Skunk Works and BAE Systems’ FalconWorks announce strategic collaboration

09 Sep 2025

2

High street retailers urged to ‘take advantage’ of new funded support programme Brian Moore, Lee Johnson, Anne Williamson and Andrew Leeming

High street retailers urged to ‘take advantage’ of new funded support programme

08 Sep 2025

3

Beaverbrooks invest in the high street in difficult conditions Mark Adlestone And Anna Blackburn Beaverbrooks

Beaverbrooks invest in the high street in difficult conditions

08 Sep 2025

4

Preston City Council invests £250,000 in NW Mutual NW Mutual chief exec Dave Burke and Valerie Wise and Matthew Brown from Preston City Council

Preston City Council invests £250,000 in NW Mutual

08 Sep 2025

5

Profit before tax doubles for Eric Wright Group in latest results Jeremy Hartley

Profit before tax doubles for Eric Wright Group in latest results

08 Sep 2025

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
Sub36 Networking - Follow the signs
Sub36 Deaf Village Social1200
Networking
17 Sep 2025

Sub36 Networking - Follow the signs

The Deaf Village, Blackburn, BB2 5EN

10:00 - 12:00

LBV124 September/October Launch Event
MBP Arc Cinema Preston Opening 205
Networking
18 Sep 2025

LBV124 September/October Launch Event

The Arc Cinema, Preston, PR1 2BL

08:30 - 10:30

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

Longridge Soap Box Derby
Screenshot 2025-06-10 090035.png.png
LBV Hub Fundraisers
14 Sep 2025 - 14 Sep 2025

Longridge Soap Box Derby

Berry Lane, Longridge, PR3 3WH

10:00 - 16:30

Preston Tech Connection - The Ultimate Tech Quiz!
Preston Tech Connection Sept 25.png.png
LBV Hub Networking
16 Sep 2025 - 16 Sep 2025

Preston Tech Connection - The Ultimate Tech Quiz!

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 19:00

The Business Network Central & East Lancashire
LBV Hub Networking
17 Sep 2025 - 17 Sep 2025

The Business Network Central & East Lancashire

Stanley House, Blackburn, BB2 7NP

11:30 - 14:15

Cumbria Business Expo 2025
https---cdn.evbuc.com-images-880461633-4862066883-1-original.20241022-110415.jpeg.jpg
LBV Hub Exhibitions
19 Sep 2025 - 19 Sep 2025

Cumbria Business Expo 2025

Carlisle Racecourse, Carlisle, CA2 4TS

09:00 - 15:00

Your Business, Your Region: Making sense of devolution and Local Government Reorganisation
Chorley Council breakfast event new
LBV Hub Networking
23 Sep 2025 - 23 Sep 2025

Your Business, Your Region: Making sense of devolution and Local Government Reorganisation

Worden Hall, Leyland, PR25 3DH

08:00 - 11:00

Preston Freelancer Meet-Up: September
Sept Freelancer (1).png.png
LBV Hub Networking
23 Sep 2025 - 23 Sep 2025

Preston Freelancer Meet-Up: September

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Speed Networking with BNI
2.png.png
LBV Hub Networking
24 Sep 2025 - 24 Sep 2025

Speed Networking with BNI

Chorley Football Club, Chorley, PR7 3DU

16:00 - 19:00

The Marketing Meetup IRL: Lancashire - September
TMM Lancashire
LBV Hub Networking
25 Sep 2025 - 25 Sep 2025

The Marketing Meetup IRL: Lancashire - September

Chorley, PR7 2SL

18:00 - 20:00

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 LBV 123 Online Graphic
Subscribe now

Weekly news bulletin