The Zombie Effect

It's estimated there are up to 150,000 so called zombie companies in the UK. They are often defined as businesses which are only able to pay off the interest on their debts and have little prospect of growing without restructuring or an injection of cash.

The BBC's Chief Economics correspondent, Hugh Pym, examines businesses caught in this situation and looks at what effect they are having on the UK economy. He hears from business experts who say these companies are partly responsible for the poor levels of growth. They say banks have huge amounts of capital tied up in businesses which are currently going nowhere and that means they have less money available to invest in more dynamic operations which have the ability to grow and create jobs. They say the banks are also unwilling to lend because they need to build up reserves to absorb losses if these businesses eventually fail.

Private equity investors such as Jon Moulton say in some cases the companies should be allowed to fail in