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Uk Recovery May Be Kiss Of Death For Some 'zombie' Firms

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http://uk.reuters.com/article/2013/09/13/uk-britain-zombies-idUKBRE98C04S20130913

Britain's economy is picking up at last but the country has a problem it didn't face after previous recessions and which even now remains hard to detect: the corporate undead.

Thousands of companies have subsisted through the downturn thanks largely to accommodating bankers and very low interest rates. As the economy gathers pace, some will recover and flourish, but the weakest of these "zombie firms" will find that competition and a shortage of cash spells the end.

More than a million people are employed by businesses showing signs of acute distress, according to the Association of Business Recovery Professionals, R3.

If recovery does kill off the weakest, that may mean unemployment gets worse before it gets better, which in turn may be a cue for the Bank of England to keep interest rates lower for longer, casting its forward guidance in a new light.

"A growth in activity means a growth in competition - demand for working capital - and those that can't keep pace potentially fall behind or over-extend themselves," said Lee Manning, a partner at accountants Deloitte.

The "zombie" phenomenon emerged in the 1980s and 1990s when U.S. savings and loan associations and Japanese banks staggered on thanks to cheap money.

The zombies are coming... Although for Carney this is a bit of a problem after his forward guidance and his talk of focussing on jobs, clearly his policy has to be to keep these companies in business...

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The zombies are coming... Although for Carney this is a bit of a problem after his forward guidance and his talk of focussing on jobs, clearly his policy has to be to keep these companies in business...

....not more zombies elephants in the room, still overcrowding is the name of the game. ;)

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http://uk.reuters.com/article/2013/09/13/uk-britain-zombies-idUKBRE98C04S20130913

The zombies are coming... Although for Carney this is a bit of a problem after his forward guidance and his talk of focussing on jobs, clearly his policy has to be to keep these companies in business...

It may(will) work out well for the banks - once M&A picks up it will give them a new income stream to replace the QE drip - as will coming privatisations and the inevitable floatations of all the BTL, ambulance chaser and cash for gold merchants at peak valuations

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Although for Carney this is a bit of a problem after his forward guidance and his talk of focussing on jobs,

The only jobs he is really concerned about are his own and those of the current Government- even if his jobs target should be met it will be replaced by another metric that allows low IR to continue- really all this is window dressing. Carney was put in place to win the next election for Osbourne and co, and that is what he will do.

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If zombie businesses go under, that's because stronger businesses have replaced them. Which is a Good Thing[1]. Thriving business can grow and offer better products and services, employ more people and treat them better; zombies can't.

[1] in general terms, and ignoring foul play.

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If zombie businesses go under, that's because stronger businesses have replaced them. Which is a Good Thing[1]. Thriving business can grow and offer better products and services, employ more people and treat them better; zombies can't.

[1] in general terms, and ignoring foul play.

Ah, but the stronger businesses have been crowded out.

In fact - who are we kidding? Any business still needs to have a crap load of debt.

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Ah, but the stronger businesses have been crowded out.

In fact - who are we kidding? Any business still needs to have a crap load of debt.

I think that's the risk, that essentially, zombie SMEs get replaced with too big to fail multi-national corporates.

On a related note, I know the prevailing view on here will be the recovery is a media pumped fantasy but, I have to report from the coal-face, that retail sales are mind-blowingly strong at the moment.

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