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Warning over high number of 'zombie' businesses

THE proportion of "zombie" businesses in Scotland and Northern Ireland is more than twice that in the UK as a whole, a survey published by insolvency trade body R3 shows.

According to R3's survey, 18% of businesses in Scotland and Northern Ireland are able to pay the interest on their debts but not repay the debts themselves.

This is the highest proportion in any part of the UK, with Greater London next at 17%. It is also twice the UK average of 9%.

The findings are for Scotland and Northern Ireland taken together. R3 does not break down the figures between Northern Ireland and Scotland.

Meanwhile, 7% of Scottish and Northern Irish businesses stated they struggled to pay their debts on time and the same proportion said they were negotiating payment terms with their creditors.

John Hall, R3 council member for Scotland, said: "The phrase 'zombie business' has been bandied around quite freely and looking at companies that can only service the interest they owe, but not the debt itself, is a practical definition of this term. I would add that the phrase also extends to those companies who are currently over-geared and cannot pay back their debt in full."

He added: "Given that the governor of the Bank of England, Sir Mervyn King, gloomily predicted that Britain may be in for a period of persistently low growth, there is real concern that we may be about to experience large-scale corporate failures."

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