Spiralling debt payments to kill off UK’s zombie firms

Britain’s army of ‘zombie’ firms looks set to be wiped out by rising interest rates, a leading insolvency expert has predicted.

The boss of Begbies Traynor said the debt-riddled firms will not survive as rates rise to bring inflation back under control – bringing the zombie epidemic to an end.

Until now, these companies have only been kept alive thanks to years of cheap borrowing costs. 

But with interest rates now at 5 per cent – up from 0.1 per cent less than two years ago – and set to rise further, their future looks bleak.

‘Over the next 18 months, we’ll see virtually all of them finally come to an end,’ Begbies Traynor executive chairman Ric Traynor told Bloomberg. 

Boom time: Begbies Traynor boss Rick Traynor (pictured) said debt-riddled firms will not survive as the Bank of England hikes rates to bring inflation back under control

‘We’ve seen an increase in activity for smaller companies over the last year because they tend to be the first ones that are hit when there’s a problem. 

‘We’re now moving into mid-market companies.’

The comments came as Begbies Traynor reported an 11 per cent rise in annual revenues to £121.8million as insolvency cases increased. 

With profits up 50 per cent to £6million, it increased its dividend for a sixth year in a row.

Russ Mould, investment director at the stockbroker AJ Bell, said: ‘Begbies Traynor tends to thrive when economic conditions are gloomy. 

Many companies have reached a tipping point where they cannot generate enough cash to service borrowings and have no choice but to fold.’