The UK’s borrowing costs are higher than the government would like them to be. Economic growth remains weak, and public finances are under constant pressure.

All of this make things difficult for pretty much everybody. But one particularly vulnerable group are the small businesses which survive mainly through continued borrowing.

Known as “zombie” firms, these are companies with persistently weak profitability which struggle to generate enough income to cover their debt costs over long periods of time.

Recent evidence suggests that the pressures on these companies are becoming more acute. Around one in six medium sized businesses in the UK is thought to be at risk of becoming a zombie firm.

And some sectors are more vulnerable than others. Businesses operating in leisure and hospitality, for example, often need substantial amounts of external finance to support tight margins, leaving them particularly exposed when borrowing costs rise.

But the worry is not simply that borrowing has become more expensive. It is that a combination of higher refinancing costs, weaker growth and geopolitical shocks could really damage firms that were already financially vulnerable.

The current pressure........

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