A fall in the number of "zombie businesses" has been overshadowed by a jump in the number of firms displaying even worse signs of business distress.
That is according to trade body R3, whose research questioning 500 UK business owners and financial directors in May found that the number of firms with serious cashflow problems has hit a new high.
The number of zombie businesses – those that are only able to service the interest on their debts but not the debt itself – now stands at 108,000, R3 calculated, down dramatically from a peak of 160,000 in November.
However, increasing numbers of businesses are showing even more acute signs of distress, added R3, a trade body for insolvency practitioners.
The number struggling to pay debts when they fall now stands at 134,000, up from 110,000 a year ago, meaning they are verging on fulfilling the technical definition of insolvency.
The number having to negotiate payment terms has also risen, from 130,000 to 137,000 year on year, R3 claims.
"Today there are more than 200,000 businesses that are either negotiating with their creditors or struggling to pay debts when they fall due," said R3 president Liz Bingham.
"This group is more troubling than the cadre of zombie business that has built up – being unable to pay debts when they fall due is a technical definition of insolvency."
Bingham added that suppliers and banks must decide which business to continue to support and which to let go.
"With the economy recovering, it is crunch time for struggling businesses as lenders start to make up their minds about which businesses to continue to support and which businesses to call time on," she said.
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