How can Insolvency Practitioners help Zombie firms in the UK?
Many UK businesses are finding it hard to survive in early 2026. Rising interest rates, energy costs and wage pressures are squeezing margins across sectors. But the focus here is on a specific group: Zombie firms.
This article explains what Zombie firms are, how many there are, which sectors are most exposed, and how Insolvency Practitioners can help directors take action before liquidation becomes the only option.
What are Zombie firms?
Zombie firms are companies that generate just enough income to cover interest payments but cannot invest, grow or reduce their debts. They often survive for years without addressing underlying problems, leaving them vulnerable when costs rise or credit tightens. Typically, they:
- Struggle to cover operating costs and debt repayments
- Depend on cheap credit or temporary support to stay afloat
- Lack the profitability or innovation needed to grow
Economists have warned for years that Britain has been held back by Zombie firms, which prevent resources being allocated to more productive sectors:
How many Zombie firms are there?
The scale of the problem is significant:
- Research (Feb 2025) found that 1 in 6 UK mid‑market businesses (15.9%) are at risk of being or becoming Zombie firms, an increase of more than 600 companies in just 12 months:
- The Resolution Foundation (Jan 2026) warned that thousands of unproductive firms are expected to collapse this year, driven by sustained high interest rates, energy costs and increases in the minimum wage:
- Insolvency statistics confirm the trend: company insolvencies rose 17% year on year in October 2025, reaching their highest level since 2011.
Which sectors are most at risk?
Market analysis highlights the sectors most vulnerable to Zombie status:
- Real estate activities – heavily exposed to borrowing costs and falling confidence
- Leisure and hospitality – squeezed by energy bills, wage increases and weaker consumer demand
- Mining and quarrying – facing global commodity pressures and high operating costs
Other reports note that SMEs across manufacturing and retail are also under strain, with confidence at its lowest in three years and fewer than half expecting turnover growth in 2026.
How can Insolvency Practitioners help Zombie firms?
Insolvency Practitioners can provide early, professional advice that opens up options beyond liquidation. These include:
- Administration: giving breathing space while a rescue plan is developed
- Company Voluntary Arrangements (CVAs): restructuring debts to allow repayment over time
- Turnaround measures: operational or financial restructuring to restore viability
The key is timing. Waiting until insolvency is inevitable limits choices. Acting early can preserve jobs, protect value and stabilise the business.
What should directors do now?
For directors of Zombie firms, and indeed all struggling businesses, the message is clear:
- Recognise the warning signs: persistent cash flow problems, rising debt costs, falling confidence
- Seek advice early: engaging with an Insolvency Practitioner before creditors force action – that can lead to a Winding up Petition and a Compulsory Liquidation
- Explore restructuring options: administration or CVA may provide a path forward.
Why early advice matters
The collapse of Zombie firms is not an abstract, long-term economic adjustment. It means job losses, broken supply chains and distressed asset sales. The Resolution Foundation has warned that while some economists see “creative destruction” as a long‑term positive, the short‑term impact will be “hugely difficult” for employees and communities.
For directors, the priority is to act before liquidation becomes unavoidable. Insolvency Practitioners can help identify solutions that protect businesses and jobs.
How can Insolvency Practitioners help Zombie firms in the UK?
Zombie firms are a growing risk in 2026, with 1 in 6 mid‑market businesses now at risk and sectors such as real estate, hospitality and mining under pressure. For directors and accountants, the choice is stark: wait until creditors force action or take control early and explore restructuring options that may save the business.
If you are advising clients, or if your own company is showing signs of distress, now is the time to act. Speaking to an Insolvency Practitioner at Antony Batty & Company can provide clarity, open up practical solutions, and help protect jobs and value before liquidation becomes unavoidable.
Do not wait until it is too late. Contact Antony Batty & Company today for an initial free of charge discussion in confidence and take the first step towards a solution.
Frequently asked questions
When should a director seek help from an Insolvency Practitioner?
As soon as warning signs appear: repeated cash flow shortfalls, rising debt costs, or pressure from creditors. Early engagement opens up restructuring options that are not available once a winding up petition has been issued. It is also important to discover what impact a delayed resolution of the business will have on the director, including loss of ongoing income and the effects on any existing or proposed personal guarantees/ debts.
What is the difference between a Zombie firm and a business in temporary distress?
A Zombie firm is structurally unproductive, surviving only by servicing debt without reducing it. A business in temporary distress may still have a viable core model and can often recover with short‑term support or restructuring. Insolvency Practitioners can help distinguish between the two.
Can Zombie firms be rescued or is liquidation inevitable?
Rescue is possible if directors act early. Administration or a Company Voluntary Arrangement (CVA) can provide breathing space and restructure debts. Liquidation becomes unavoidable only when directors delay until creditors force action.
Which sectors are seeing the most referrals to Insolvency Practitioners?
Real estate, hospitality, and mining are currently the most exposed, but accountants are also referring SMEs in manufacturing and retail. These sectors are under strain from energy costs, wage pressures, and weak consumer demand.
What role do accountants play in tackling Zombie firms?
Accountants are often the first to spot the warning signs of insolvency in client accounts. One of their key roles is to advise directors to seek specialist help early.
How confidential is the process of seeking advice?
An initial meeting with one of our Insolvency Practitioners is confidential, and free of charge. Directors can explore options without triggering formal proceedings, giving them time to make informed decisions before creditors escalate matters.
