Company failures and rising job losses are inevitable following the end of the government’s furlough scheme next month, leading industry accountant Chris Photi has warned.
Photi, head of leisure and travel at White Hart Associates, said: “The industry has done remarkably well to this point. We’ve had one or two high-profile failures – Shearings, STA Travel.
“[But] furlough cash is running out and crunch time is coming for a lot of businesses. There are going to be more failures.”
Speaking at the Travel Weekly Future of Travel summit on the Future of Regulation, Photi insisted: “I hope not many people lose their jobs. But, unfortunately, unemployment is going to rise severely.
“A lot of young people are going to suffer, and that pains me at my stage in life.”
Photi argued companies face a dilemma in preparing for demand to return. He said: “A travel business is pretty complicated in the way it’s run operationally, but its overheads are pretty simple.
“You have two main overheads – marketing and staff. If you’re not marketing and the government is paying your staff, you’ve been able to get through these six months. Some businesses have hibernated.
“The problem you’re going to face is when we get a bounce back [in demand].”
He said: “In order to bring in income, you’re going to need to market and you’re going to need to engage staff. Unfortunately, those need to be paid for before the payback. That is going to put pressure on businesses.
“I’m a director of a small business and we had 43 members of staff. We furloughed half of them. We’ve had to lay off people. We have eight members of staff keeping the business ticking over.
“When bounce back occurs, we’re going to need to take staff back on but we’re not going to allow the business to go through a period where we’re paying staff when there is no business.”
Photi does foresee a bounce back. He said: “There is pent up demand for travel. As soon as I think it’s safe to travel, I will be traveling abroad as I’m sure most people will. That demand won’t go away.
“But there is bound to be a transitional period. Are we going to get a V-bounce – probably not. Whether it’s 50%, 60% or 70% [recovery], I don’t know.
“I would expect it to be more than 50% because the average take-up of refund credit notes has been about 50%.”
