Zombie Firms Dragging Down Business
7th December 2017.
Thousands of “zombie firms” are holding back the economy by soaking up credit that could be used to finance the businesses of the future, a study has claimed.
The Organisation of Economic Co-operation and Development (OECD) recently released a study on the impact so-called ‘zombie firms’ are having on Britain’s productivity and the overall economy. The report strongly suggests a clear out of these firms will allow the country to grow more quickly.
Zombie firms have long been a source of great concern from financial bodies like The Bank of England and The Office for Budget Responsibility. These small businesses are just about surviving on the surface but do not have capital to expand or to drive industry.
The OECD claims that zombie firms are a “drag” on productivity, as they prevent investment and skills from flowing to other more successful businesses, as well as slowing down the progression of new practices and new technologies within the industry.
Our historically low interest rates were blamed for enabling these companies to limp on without being forced to restructure.
Nonetheless, the OECD insists that Britain is not the only large nation to this problem. While only 3.85 per cent of the UK’s 2.5 million companies are “zombies”, 10 per cent of Spanish firms, 5.8 per cent of Italian businesses and 7.6 per cent of Japanese companies qualified.
The study found that the UK would achieve a 0.4 per cent increase in productivity if it pushed out the crippled firms.
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