Covid-19 triggers soaring level of travel and leisure sector profit warnings

The travel and leisure sector is set to emerge from the Covid-19 crisis behind leisure and hospitality.

The downbeat forecast came as new figures showed that FTSE travel and leisure companies have issued 54 profit warnings so far in 2020 – equating to more than two years’ worth of warnings in less than six months.

The figure is six times the number compared to the same period last year when nine were recorded, according to the latest profit warnings report published by tax an advisory firm EY.

Almost all (95%) of warnings issued by quoted travel and leisure businesses this year have cited Covid-19 due to exposure to the impact of national lockdowns.

Travel and leisure was the most dramatically affected in the first quarter of the year, with 70% of the sector issuing a profit warning, followed by Industrial materials (63%) and retailers (61%).

EY UK and Ireland travel leader Mark Hemming said: “The travel and leisure industry was hit hard and fast by the necessary actions employed to limit the spread of the coronavirus, with many effectively shutting down overnight.

“Some took swift action to conserve cash and access government support, however surviving the lockdown is just the first hurdle.

“The challenge now is preparing to emerge safely from lockdown, amid uncertain demand, in a staged return to a new form of normality.”

Looking ahead, EY expects the number of UK profit warnings to fall, but distress levels to rise – with echoes of 2008 to 2009 and the aftermath of the financial crisis.

Notably, there were more insolvencies in 2009 than 2008.

Hemming added: “Anticipating a staged end to the lockdown, we expect travel and leisure sub-sectors to recover at different paces.

“Broadly speaking, travel will emerge more slowly behind leisure and hospitality.

“There is likely to be a difference between domestic and internationally oriented markets, especially when travel restrictions are expected to relax at different times.

“Demand will also vary significantly between consumer and business markets, linked to confidence and the appetite to spend, which will leave businesses running at reduced capacity for the foreseeable future.”

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