"We see a new catalyst in 2026 that could push some over the edge, as HM Revenue & Customs starts to call in some of the £27 billion in overdue corporation tax, PAYE and VAT following the pandemic. Over the years, there have been many tipping points for zombie companies, but the heightened level of critical distress combined with weak consumer spending, compounding cost inflation and action from HM Revenue and Customs, could mark another milestone."
"During the crucial final quarter of 2025, the UK economy continued to experience subdued levels of consumer confidence. This has had a painful impact on the hospitality, retail and housing sectors, which have been under considerable pressure for some time."
"starting the new year with some very difficult choices ahead, as the weight of slower spending and increased running costs bring them to near breaking point."
Tens of thousands of 'zombie' firms risk collapsing this year due to increased taxes, higher wage bills, sustained inflation and weak consumer demand. A 44% year-on-year increase occurred in firms classified as in 'critical' financial distress during the first three months of 2025. Zombie firms are highly leveraged, unprofitable and generate just enough revenue to service debt without funding growth. Hotels recorded a 54% rise in financial problems and restaurants and bars saw a 39% increase over the last year. Slower spending and higher running costs are pushing small businesses toward breaking point. HM Revenue & Customs planning to collect about £27 billion in overdue tax liabilities could trigger further collapses in 2026.
Read at London Business News | Londonlovesbusiness.com
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