Deloitte report warns of productivity hit from lingering ‘zombie firms’

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TORONTO — A new report raises concerns about the number of lingering low-productivity firms in Canada that are hindering overall economic growth.

The report by consultancy Deloitte says at least 16 per cent of Canadian public companies fall into the category of so-called zombie firms — more than 10 years old but unable to cover interest payments from earnings.

It says the level is 60 per cent higher than the global average of 10 per cent and shows Canadian firms are vulnerable to economic shocks and technological disruption.

Deloitte says when such companies manage to survive, they divert capital and talent away from more productive firms and make it harder for younger, more dynamic businesses to grow.

The consultancy says the issue is part of wider challenges to an aging stock of Canadian businesses where 44 per cent of firms aged 10 years or older had stagnant or negative three-year revenue growth rates between 2009 and 2016.

It says that despite a rapidly-changing technological and business environment, the rate of business exits is steadily declining and at the lowest level in decades.

 

The Canadian Press