Liquidating zombies might sound like the plot of a low-budget B-movie, but for many debt-ridden British households, it is a very real threat to their future finances.
The latest quarterly statistics from the Insolvency Service show that individual insolvencies were down 6.1% in the year leading to the second quarter of 2013, but up slightly on the previous quarter.
Individual voluntary arrangements in particular were up substantially year-on-year by 6.8%, but falling debt relief orders and bankruptcy orders more than offset this rise.
Among companies, a smaller annual drop in insolvency was recorded, at 2.1%, but the quarterly trend was also an upward one, with 10.5% more compulsory and voluntary liquidations in the second quarter of 2013 than in the first three months of the year.
‘Zombie businesses’ have already made the headlines several times in recent months; these are firms which are just able to manage their outgoings, but which would be unable to cope if their income were to fall substantially, or their expenses were to rise.
Now it seems many domestic households are facing the same situation, as the Debt Advisory Centre has warned of ‘zombie borrowers’ living on the edge.
Melanie Taylor of the Debt Advisory Centre said: “There are so many zombie borrowers out there, only just managing to stay on top of their debts.
“We’ve already seen a big increase in the number of homeowners entering debt solutions.”
However, she stressed that in many cases, cash-savvy households are balancing their commitments well, and should be able to cope indefinitely unless a significant external impact affects their affordability.
For those in business – whether in a B2C or B2B discipline – it remains a turbulent and worrying time, and checking the creditworthiness of customers before extending a line of credit to them is as important now as at any point during the recession.