Zombie Companies Could Drive 2026 Job Losses

Brace yourself: 2026 may be the year a wave of failing “zombie” firms starts to reshape the UK jobs market. A new forecast from the Resolution Foundation warns that companies barely scraping by could finally buckle under rising costs, pushing unemployment higher. The thinktank says businesses have faced a triple squeeze — years of higher interest rates, elevated energy bills and a rising minimum wage — that could finish off the least productive firms. While that cull may improve the economy’s long-term muscle by freeing up workers and capital for more efficient companies, the immediate cost will be displaced workers and tougher times for communities reliant on small employers. Ruth Curtice, the foundation’s chief executive, describes the signs as an opening for “creative destruction”: newer, more productive businesses replacing underperformers. She also pointed out that this shift won’t automatically lift living standards. The thinktank warns that household incomes are set for only weak growth through the rest of the parliamentary term, making short-term support essential. The UK already saw unemployment rise to 5.1% in October — the highest level outside the pandemic in a decade — as firms held back on hiring ahead of last autumn’s budget. The pressure on businesses is visible in independent data from the British Chambers of Commerce. In a survey of more than 4,600 firms carried out in November and early December, tax burdens topped concerns, followed by inflation. Fewer than half of firms expected turnover to grow over the next year, and nearly a quarter foresaw declines. Less than one in five had increased investment, while over a quarter scaled back plans. Politicians and policy makers face a balancing act. On one hand, allowing unproductive companies to fail can boost productivity — especially as firms adopt new technologies, including artificial intelligence. On the other, communities and individual workers need support for the disruption: retraining, income support and regional investment could soften the blow. Business groups warn confidence has slipped to its weakest in three years, leaving small and medium-sized firms particularly exposed. For many workers, the coming months will feel personal: a local café or manufacturer that limped along on cheap borrowing in the past may now be unable to cope. 2026 could mark a turning point for the UK economy. Whether it becomes the year the country finally shakes off stagnant productivity — without leaving large numbers behind — depends on choices made now by government, employers and local leaders. --- Managing your business finances? TaxAce provides smart online accountancy services for UK businesses with flexible monthly plans. Image and reporting: https://www.theguardian.com | Read original article