Number of Negative Equity Firms Up 5.5%

Companies with bad debt increases to 339,800, with negative equity totalling £72bn

The number of businesses with negative equity has risen by 5.5% in the last year to a staggering 339,800, according to research released by corporate financial health monitor Company Watch.

Negative equity businesses are defined as firms with debts that exceed their assets by at least £5,000. And despite economic growth over the last few years, the number has risen significantly from 2009’s 109,383, with the total of negative equity now equalling £72bn.

According to the research, the sector with the greatest number of struggling firms is media and business services companies, making up 37% (88,832) of the overall number; followed by construction firms at 11% (26,223); and finally retail at 9% (21,373).

Company Watch’s business risk analyst, Nick Hood, warned of the impact struggling businesses could have on the overall economy:

“With insolvency appointments dropping precipitately and zombie numbers rising steadily, it looks like the entire UK economy has been infected by the pernicious influence of the ‘delay and pray’ mentality.

As the economy improves, a proportion of these businesses will be able to trade themselves into stronger positions. But […] many others will cause a surge in insolvencies for the weak and rapidly rising bad debts for their banks and other creditors.”

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