Zombie Apocalypse predicted for sluggish companies in 2026

A thinktank has warned that the year ahead could see the collapse of so-called “zombie” companies that finally succumb to the bite of rising business costs after months of battling. However, it also argues that this leaves space for new small enterprises and startups to shine.  

As businesses brace for the changes announced in the Autumn Budget – and await the Workers’ Rights Bill becoming law, this outlook report suggests that for some ventures, this will be a very bad year. 

In fact, the Resolution Foundation argues that 2026 could be a “turning point” with firms that have suffered from years, if not decades, of sluggish growth finally disappearing. However, the analysts also give the optimistic view that they will be replaced by new ventures with a better chance of survival.

Zombie Apocalypse

The new year outlook report from the Resolution Foundation does not read as dramatically as the terminology suggests. It is the companies that have become “zombies” that the report suggests might not make it through the year; as opposed to healthy companies being attacked. 

Ruth Curtice, chief executive of the Resolution Foundation, writes in the report: “Our hunch is that the triple whammy of multi-year increases in interest rates, energy prices and the minimum wage is finally beginning to finish off some of the low-productivity ‘zombie’ firms that managed to stay afloat in the 2010s, and this is forcing a reallocation of employment across firms and sectors.”

For the many companies struggling at the moment, this may read as a death knell. However, while there is no breakdown of the size of ventures the thinktank is referring to, the authors point specifically at companies that have had no productivity for more than a decade.

They argue that “…Weak productivity growth is the main reason that incomes have risen so slowly since the financial crisis. A key driver of productivity growth is ‘creative destruction’, whereby newer and better firms, products or processes replace older, less-efficient, ones.”

Turbulent waters

However, the report also acknowledged that this coming year, in which this “apocalypse” will take place will be a transition year; and with that will come job losses and then a “reallocation” of roles. 

The team suggests that there were signs last year that 2026 could be pivotal. It points to the fact that “the share of jobs destroyed by firms that are closing increased to the highest level since 2011”, as did the number of firms becoming insolvent. Now, the data suggests that people are moving more between sectors as old jobs are cut and new roles are created. 

The thinktank had called for change in a report in 2023, in which it argued that “greater dynamism” was needed; and that the Government policy must “not only boost dynamism, but also cushion its impact”.

The report also suggests that the uptake of AI may have played a role, and will continue to do so even as the EU considers what its AI Act regulations will look like and how they will be enforced. 

With confidence low, the negatives of this report might cut; but the positive takeaway is that businesses that embrace change might have stormy waters to contend with for a while but there could be calmer sailing beyond.