New help for zombie firms as debts bite
LLOYDS hopes it can save tens of millions of pounds by sending in turnaround experts to combat the horde of zombie firms plaguing the economy and bank balance sheets.
But KPMG yesterday warned that thousands of struggling firms could starve to death, running out of cash over the next year if the economy does not improve, particularly in the retail and construction sectors.
Zombies are firms that are barely staying afloat, only surviving thanks to low interest rates but unable to pay off their debts.
Lloyds has arranged for 100 small zombies to get help as part of its tie-up with the Institute for Turnaround – something usually only within the financial reach of bigger firms. It hopes shaking up their business model will give firms long-term hope and create a healthy bank customer.
“If nothing is done, it would mean a loss of tens of millions or hundreds of millions in bad debts, as well the wider harm of people losing their jobs,” Lloyds’ Duncan Parkes told City A.M. “So Lloyds will see a benefit of several millions from this.”
The bank has up to 500 more firms it hopes to save through the same process.
And Lloyds’ staff have an additional incentive to rescue the businesses – their bonuses are in part related to the number of firms turned around successfully.