Red Flag Alert points to insolvency risks in the Travel Industry

16 October 2011

The latest quarterly report into the levels of financial distress in UK companies has been compiled by the insolvency firm, Begbies Traynor, in their Red Flag Alert report.

Key findings from the Q3 2011 Begbies Traynor Red Flag Alert statistics include:

The Travel and Tourism sector has seen a 49% increase in companies facing ‘critical’ distress compared to Q3 2010 and a 29% increase in companies facing ‘significant’ financial distress when compared with Q2 2011. Travel operators have given profits warnings as consumers cut back on holidays.

Across all sectors there has been a 23% increase in the number of companies in "critical" financial distress when comparing Q3 2011 to Q3 2010.  However, The report does not say how many companies are experiencing "significant" financial distress over the same period.  It is therefore difficult to be sure what the current levels of distress are.  Distress is a pretty subjective thing to measure and the current low levels of administrations and winding up petitions being issued confuses the picture further. Companies may have less to spend and are increasingly in debt but they are not falling down in quite the same way as happened in previous recessions. 

Other interesting trends has been the North South divide.

Against a UK average rise of 2%, the number of businesses facing both significant and critical financial distress in the past quarter dropped by 6% and 3% respectively for London and the South East, while all other regions in England and Wales faced increased levels of distress.

Hardest hit was the  North East with a 19% increase in business distress, followed by the North West with a 12% rise. Yorkshire, the Midlands, Wales and the South West regions all saw increases in business distress of 10%.