ZOMBIE companies are being allowed to keep ‘bumping along the bottom’ by banks that have been holding off taking action over debt.
That’s the view of Stephen Grant, of accountants Wilkins Kennedy, who was speaking at a breakfast meeting on Thursday, July 19.
“There are a lot of zombie companies out there,” said Mr Grant, at the July meeting of West Herts Business Breakfast (WHBB). “If they all did fail we feel unemployment would go up substantially.”
Mr Grant explained to the audience of 20 business leaders at the Bobsleigh Inn Hotel, in Boxmoor, that the banks, often lambasted for strict lending policies, were allowing zombie companies to keep going in the hope the economy would pick up.
One of the messages from the event was for companies to keep a close eye on their cashflow. “There are a lot of businesses trading when they should not be, where projections are not being met,” he said. “Businesses need to know their cashflow and how it is integrated with the profit and loss account.”
He said communication with customers and creditors was vital but poor management is a big issue.
Guy Thomas, of law firm and WHBB sponsor Taylor Walton is a specialist in insolvency work, including bankruptcies of footballers. He said: “The recession hits everybody. These are not bountiful timers, even for solicitors!”
He warned directors risked personal assets if they signed terms and conditions for loans without reading them first. “If you sign it, you are on the hook,” he warned.
He added the taxman was likely to get tougher to help repair the public finances.