The UK economy is facing a wave of business failures described as a 'zombie apocalypse', driven by a lethal combination of high borrowing costs, soaring energy bills, and increases to the minimum wage, a leading think-tank has warned.
The Triple Whammy Threat
Analysis by the Left-leaning Resolution Foundation suggests this 'triple whammy' of multi-year increases will prove the final nail in the coffin for many older, less productive companies that have managed to stagger on since the 2010s. The report indicates this trend may now be starting to change dramatically.
'Our hunch is that the triple whammy of multi-year increases in interest rates, energy prices and the minimum wage is finally beginning to finish off some of the low-productivity "zombie" firms that managed to stay afloat in the 2010s,' the report stated. Ruth Curtice, the Foundation's chief executive, pointed to early signs of what she termed a 'mild zombie apocalypse' within the business landscape.
Business Confidence Plummets
This alarming forecast compounds existing economic gloom under Prime Minister Keir Starmer and Chancellor Rachel Reeves. Separate figures from the British Chambers of Commerce (BCC) reveal that business confidence has hit its lowest point in three years.
A poll of 4,600 UK firms in November and December found only 46% expect sales to increase over the next year, down from 48% in the previous quarter. The BCC's research head, David Bharier, said 'more clouds have gathered over business confidence,' noting a recent Budget 'fundamentally light on growth measures did little to boost' sentiment.
The survey's key findings include:
- Retail and hospitality sectors are suffering the most.
- Taxation remains the top concern for businesses.
- Investment levels have fallen for five consecutive quarters.
- Over half of all firms plan to raise prices in the next three months.
Consequences and a Silver Lining?
The prospect of widespread firm closures presents a serious challenge, with unemployment already at its highest level since early 2021. The Resolution Foundation acknowledges that such job losses would be 'hugely difficult for many of those directly affected'.
However, the report also posits a potential long-term economic benefit. It argues that clearing out these persistently weak 'zombie' companies could 'begin to make room for more and better jobs to be created', potentially boosting overall productivity.
The analysis also connects the changing fate of these firms to the rise of artificial intelligence, which some businesses are adopting to cut employment costs and operate more efficiently in a challenging environment.
