What is the impact of companies under sustained financial difficulties, or ‘zombie firms’ on the UK and its economy?
Since the 2008 recession, we’ve witnessed the rise of unusual economic creatures. Hiding in plain sight, they employ thousands of people in the UK and operate across almost all sectors of the economy. Yet, these apparently benign beings have a dark side, limiting domestic productivity growth and threatening to exacerbate a future economic downturn. They are the zombie firms.
For a term which is so evocative, there is no one definition on what a zombie firm actually is. One view is it’s a business which is unable to cover its debt servicing costs from current profits over an extended period; another definition describes it as any company receiving subsidised credit as a 'zombie'.
Zombies have been allowed to sleep walk for the past decade largely undisturbed, thanks to an extraordinary monetary and political environment that is unlikely to persist indefinitely.
However, zombie apocalypse can be avoided. Yael Selfin, Chief Economist, in her latest report explains why action should be taken now to limit their exposure.
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