Insolvency in the holiday and hospitality sector

Published on May 10, 2018 by Crawfords Accounting

The start of 2018 has been a difficult time for company insolvency in the holiday and hospitality sector, as operators continue to face a pound that is much weaker than in previous years.

Brexit and the strength of the pound

Following the EU Referendum on June 23rd 2016, the value of the pound dropped from €1.30 to €1.23 overnight, and from $1.49 to $1.37.

As of early May 2018, exchange rates stand at €1.13 and $1.34 – even lower than the overnight shock felt following the UK’s ‘Leave’ vote in 2016.

This has all put leisure industry operators in the UK under pressure, as real-terms costs have increased overseas, while a series of political upheavals and acts of terrorism have affected specific markets too.

In 2018 alone, poor weather led to subdued activity throughout the early part of the year – even more than can typically be expected in a seasonal holiday industry – and a particularly bad Easter led to many Brits staying at home.

The outlook is not good for insolvency in the holiday and hospitality sector in the UK, following the Bank of England’s Monetary Policy Committee’s decision to hold the base rate at just 0.5% again in May 2018.

While an increase had been expected by some economists based on retail performance, the decision to maintain the rate is an indicator of weaker economic performance across the board.

Catch-22 for debtors

While a low rate is good news for those in debt, for many UK leisure operators it represents a Catch-22 situation, as while an increase in interest rates would mean an increase in outgoings to serve business debts, it would also be a sign of a stronger economy and potentially an uptick in earnings.

As always in a beleaguered sector, the important thing is to take action before you find yourself in inescapable financial difficulty.

By doing so, you can protect yourself against claims of poor company directorship later and help to justify any spending decisions that may put creditors’ money and customers’ deposits at risk.

With summer around the corner, many operators will be entering their peak season, and any company insolvencies in the hospitality sector will have the biggest impact – making it more important at this time of year than ever to seek professional insolvency advice if you are concerned about the survival of your company.

If you work in the holiday and hospitality sector, and are worried about how this may affect you, get in touch with us today. We will provide professional advice to make the best decisions.

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