A report coming out later this month will show that nearly four in 10 travel companies are now in ‘significant’ financial distress. Data analysed by insolvency firm Begbies Traynor found 2,679 businesses in the travel sector – thought to be made up of around 7,000 companies – were experiencing significant distress in the last thee months of 2016.
This was a 10% rise on the previous quarter and a 4% rise on the same quarter last year. Of these, 33 were deemed to be in ‘critical’ distress, a 10% rise the previous quarter and 18% higher than the previous year.
Regional managing partner Julie Palmer said it was a worrying trend and, just days after the collapse of All Leisure, said there were more failures to come. “Terrorism is a growing threat, particularly affecting some of the traditional holiday favourites like Turkey, Egypt and Tunisia, and there’s also been a downturn in customer sentiment post Brexit, The weaker pound is having an effect too. Small and medium-sized companies were most at risk, and particularly those which sell holidays to the more ‘risky’ destinations.The small and medium companies are the ones who struggle to make the adjustments, The big travel companies are like the large supermarkets – they pass the pain down the supply chain.”
Begbies Traynor’s report is based on whether companies have County Court Judgments against them. Businesses who have judgments against them of up to £5000 are categorised as in ‘significant distress’. Those with judgements against them of more than £5000 are regarded as in ‘critical distress’.