The UK economy is predicted to face significant challenges in the coming year, as an influential think tank, the Resolution Foundation, warns of a “zombie apocalypse” with numerous unproductive firms expected to collapse. This forecast arises from the impact of multi-year increases in interest rates, energy prices, and the minimum wage, which are anticipated to lead to the demise of low-productivity firms, making way for more efficient replacements.
This warning comes in the wake of a notable rise in company insolvencies, with the number of firms closing reaching its highest level since 2011. In October 2025, company insolvencies increased by 17% to 2,029 annually. Ruth Curtice, Chief Executive of the Resolution Foundation, described the situation as an early indication of a “mild zombie apocalypse,” where struggling firms are being phased out, allowing room for new, more productive enterprises.
However, Curtice cautioned that this transition could result in increased unemployment, which has already surged past 5% in 2025. The think tank indicated that while the reduction of ‘low productivity’ firms might offer potential for future productivity growth, the anticipated creation of “more and better jobs” has yet to materialise. Curtice urged policymakers to intensify efforts to address these challenges.
The Resolution Foundation has warned that the country is undergoing a slow but consequential transition, characterised by a shrinking working-age population, fragile politics, higher taxes, and an economy in need of new firms and jobs to replace the old.
The think tank suggests that 2026 could mark the beginning of a “new era,” where deaths outnumber births, further straining public finances and necessitating increased tax revenues to fund government spending. Curtice emphasised the need for serious consideration of the future of public services and the tax revenues required to sustain them in an ageing society.
