Zombie businesses are helping to make the official rate of corporate insolvency appear lower than was the case during previous economic downturns, according to a parliamentary report.
In a report simply entitled The Insolvency Service, the House of Commons Business, Innovation and Skills Committee explains that some companies are surviving on the very edge of serviceable levels of debt.
The decision to do so is seemingly prompted by the relatively low value of assets at the present time, which is leading some owners to choose not to enter into corporate insolvency.
“While there have been some high-profile corporate insolvencies on the high street, the overall scale of business failure has remained low compared to the aftermath of previous recessions,” the report claims.
This in turn means that the Insolvency Service is not seeing the level of case work that might normally be expected, given the economic conditions.
However, the Service has responded to the report, stating: “We believe that the Insolvency Service’s strategy for the coming years … is able to respond to volatile changes in demand.”
For business owners with unmanageable debts, corporate insolvency is still an effective means of resolving financial difficulties without the risk of being pursued through the courts by creditors seeking settlement of overdue debts that have simply been ignored.
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