Zombie companies are companies that are at least ten years old but can not cover their costs with their profits. A report from the Bank for International Settlements (BIS) now reveals that there are more and more such firms – with significant economic implications.
Low interest rates are to blame
According to the BIS report, low interest rates in particular have led to the rise of zombie companies. Because low interest rates lead to the admission of high credits and reduce the debt pressure.
The loans require the zombie companies to settle at least part of their bills and to be able to stay afloat in the medium term.
In a research report, Deutsche Bank has also made the low interest rates of the past ten years responsible for the rise of zombie companies.
Proportion of zombie companies has gone up
In their study, the experts of the BIS take into account a total of 14 countries – including Germany. Between 1980 and 2016, the proportion of zombie companies on average increased by ten percent.
The study authors are an increasing danger to the economy in these companies. Because of their low productivity, zombie companies inhibit both employment and investment in other, more productive companies.
Interest rate rise particularly dangerous
However, the greatest danger emanating from the zombie companies in an interest rate rise. Then the financially strained companies can no longer service their loans. In the worst case, this leads to a collapse of the zombie companies and rising unemployment.
Eoin Murray of Hermes Investment Management told US news channel CNBC that a rise in interest rates could end in a recession. In the long term, this in turn could lead to the extinction of zombie companies and to positive developments in the labor market.