The epidemic has left many companies in Alicante more exposed than ever. The surge in debt that businesses had to take on to keep operating during lockdown, paired with a sharp drop in revenue, has given rise to a notable segment of zombie companies — entities that cannot cover their financing costs for two consecutive years.
This situation does not automatically mean bankruptcy, but it makes long-term viability increasingly fragile unless precautionary steps are taken. In other words, a number of these firms feel effectively immortal in the face of uncertainty.
Data from D&B indicates that there are currently 1,716 companies in Alicante that fit this category, having failed to meet debt obligations in 2019 and 2020. The firm notes that this is the early stage where investment outpaces profitability, and it excludes holding companies from the count.
This figure marks a 12% rise from a previous study that identified 1,527 zombie companies in the province by examining accounts for 2018 and 2019, as reported by the commercial and financial information provider.
In terms of industry, the largest share of zombie companies in Alicante comes from real estate and construction — nearly twice last year’s level, with 613 over-indebted firms in this sector. This is a striking statistic for the company landscape, reflecting a heavy financing burden across the sector.
Tradewith follows with 347 vulnerable companies, up 13%; and the third largest group includes 204 zombie companies in other industries, a rise of 31.6%. The size of firms matters here, particularly those offering services to other businesses. These firms often cut external services to curb expenses, which can worsen their financial fragility.
As a result, and as anticipated, the biggest growth in zombie businesses occurred in the hospitality sector, where the number of firms unable to cover debts rose sixfold, from 18 to 113, according to the same sources. A few sectors have shown improvement, notably telecommunications, where the number of vulnerable companies decreased significantly.
end of moratorium
The director of studies at the data firm explains that an inability to cover financial expenses for two consecutive years does not automatically render a business unviable, but it does place it in a more precarious position. The challenge is distinguishing between firms with genuine, deep-seated problems and those temporarily masked by the moratorium, a government approval that allowed delays in bankruptcy filings.
The government approves the Bankruptcy Code reform and sends it to Congress.
A moratorium extension is not expected to be granted again, with a deadline set to expire. Experts predict this will reveal the true depth of the pandemic’s impact on the province’s productive fabric and, more broadly, the national economy. The reform of the Bankruptcy Law is also expected to be approved by Congress in the near term.
Government action on ghost companies
Beyond zombie firms, attention has turned to shell companies — entities that do not engage in active business and fail to file annual accounts. Most of these are inactive, but some are used improperly as fronts for illicit activities. To address this, the government has launched a campaign to penalize such entities through the tax authorities for failing to settle balances.
The initiative is not new, though it gained renewed momentum as part of broader oversight. Informa D&B estimates there are about 1.2 million such companies across Spain, with around 122,351 located in the Valencia Community, nearly 10% of the national total. A sizable portion date from before 1995, underscoring the long-term accumulation of such registrations.