Insolvencies at 32-year low – but what will happen when Government support ends?
Whilst this headline seems to put a positive spin on recent statistics provided by The Insolvency Service, we know that for many the Government support provided during the pandemic has simply enabled businesses to ‘kick the can down the road’.
There have been a number of articles published recently about ‘zombie companies’ – a term given to a failing business that is neither dead or alive or that is kept ‘artificially alive’ by the extension of credit, as has happened since the start of the COVID pandemic.
The issue with the increase of zombie companies is that as government support comes to an end in the next few months, some of these businesses may not be able to carry on and we will see a surge in insolvencies.
Some industries have experienced more hardship than others over this last year and may simply be unable to recover.
It is paramount that directors and stakeholders are proactive and assess their companies’ situation, determining what the future of the business looks like (where possible) and obtaining specialist advice sooner rather than later if they foresee any challenges.
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