Saturday, 26 January 2013

Zombie 2

Here is a link to a quite interesting discussion between the senior staffers at the Economist on why UK GDP is so flat with rising employment levels.  They offer 3 or 4 alternative reasons but perhaps the most compelling is this idea of Zombie companies holding us back.
These are companies are typically loss making but surviving because of the low interest rates on their loans.  The Bansk are unwilling to close them down because of the 'right offs' this would entail that will harm there balance sheets, when they need to bolster their capital reserves.

The Economist believes more credit easing by the Government might be the solution; allowing the cash strapped banks to 'let go' of fold these unproductive loans so new more dynamic companies can come through.  Feels like any solution will take a while.

See my last blog on this - We're all Zombies now

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