By Patrick Corby
On the 14th November the Bank of England’s (BoE) released its quarterly inflation report. The report cited ‘zombie’ companies, along with international conditions, as a key obstacle to growth with roughly three of every ten UK companies making a loss.
These companies can pay interest payments (due to the Bank of England’s low interest policy) but not the underlying debt, allowing them to limp along with unsustainable business models. Those most effected according to R3, the insolvency agency, are hotel and catering and nearer the Christmas period retail will suffer. The BoE is concerned that it’s allowing those not took out by the recession to idly demand capital.
Those companies who are hiring the most right now, the smallest start-ups, are also the ones who are most unsustainable; unemployment is being kept artificially low.
“Obviously, this cannot continue indefinitely”, “Policy can only smooth, not prevent, the ultimate adjustment” said Sir Mervyn.