Small interest rate hike would kill 20,000 zombie businesses

 
Tim Wallace
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Zombie businesses are kept afloat because interest rates are low (Source: Getty Images)
Hiking interest rates to just 1.5 per cent would drive tens of thousands of companies to the wall, insolvency practitioner Begbies Traynor warned yesterday.

It estimates there are 218,000 distressed firms in the UK, a large proportion of which are zombies – businesses that are staying afloat only because interest rates have been kept so low.

When the base rate rises from 0.5 per cent, they will go bust if they cannot turn themselves around before that change.

“While low interest rates and creditor forbearance continue to ensure that businesses are kept off the critical list, you just need to scratch beneath the surface to see clear signs of a twin-track economy,” said chairman Ric Traynor.

“While larger corporates have taken full advantage of the market opportunities available to them, a growing number of SMEs are overtrading and risk falling at the last hurdle.”

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