2012 will see record number of ‘zombie’ shops, claims study

A FREEZE on spending by cash-strapped consumers is set to push a record number of shops, manufacturers and property businesses to near‑collapse in 2012, a body representing advisory firms warned yesterday.

The number of businesses unable to generate sufficient cash flow to repay borrowings is set to grow, according to research by the Institute for Turnaround (IFT), a not-for-profit organisation. The claim came as new figures from accountancy firm Wilkins Kennedy showed the number of restaurants going bust leapt 31 per cent to 194 in the last quarter of 2011. That compared with 148 restaurants failing in the final quarter of 2010.

The IFT said so-called zombie companies – businesses unable to generate cash or attract development capital – are on the rise.

The research comes as retailers such as Thorntons, Barratts, Priceless, Blacks Leisure and Thomas Cook all announced administration plans and job losses at within the past few months.

Christine Elliott, IFT chief executive, said: “While we may like to blame lack of consumer spending and confidence for some of our economic problems, there are other factors at play, for example government spending cuts and companies failing to identify and dealing with problems early enough.

“Time and again we see businesses, such as Peacocks, fail because they aren’t making the operational changes necessary to achieve sustainability.”

Some 30 per cent of businesses stuck in financial limbo are in London, the IFT said, while 22 per cent are in the English Midlands and 12 per cent in the north-west of England.

More than one in four businesses said companies that get stuck in this “zombie” state remain this way for more than two years.