The rise of zombie companies – what are they and can they be stopped?

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We take a look at the rise of the zombie and why it’s best to avoid them.

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

2 August 2023

A zombie company is a business which is able to pay the interest on its debt but isn't able to repay the principle loan without turning to shareholders for extra cash.

Specifically, a zombie company might be making profit, with more sales than costs like wages and inventory, but all of that profit is paying the interest of its debt pile.

This should not be viewed as personal advice, please ask for advice if you are not sure.

A company like this doesn't have the cash to invest in future growth. Significant debts and no way to build up spare cash can also leave superficially healthy companies very vulnerable to unpleasant surprises.

Put those two things together and a company which is stuck in the zombie zone for any length of time will struggle. To turn itself around it would need either a dramatic change of