A total of 2,555 tour operators and travel agencies were in ‘significant financial distress’ in the first quarter of this year, according to analysis by corporate restructuring experts.
The Business Distress Index – compiled by Begbies Traynor-owned Real Business Rescue – found that 877 tour operating companies and 1,678 travel agencies, reservation services and related firms of all sizes were in financial distress.
That figure is up by 14% on the final quarter of last year – and 46% up year-on-year – as the continuing pandemic takes its toll.
The index also looked at the wider sector of travel and tourism and found there were 5,164 SMEs (small and medium-sized enterprises) in significant distress in the first quarter of 2021 – a 13% increase on the final quarter of 2020.
This means an estimated 27,000 jobs in travel and tourism SMEs are under threat.
More: 2,200 travel agencies and tour operators in ‘significant financial distress’
Businesses are considered in ‘significant distress’ if they have minor County Court Judgements (CCJs) of less than £5,000 filed against them, or if they have been identified by Red Flag Alert’s proprietary credit risk scoring system.
Red Flag screens companies for a sustained or marked deterioration in key financial ratios and indicators, including those measuring working capital, contingent liabilities, retained profits and net worth.
Furthermore, the number of start-up travel and tourism firms (created after 2017) in significant financial distress had increased by 13% in the first quarter of 2021.
There are now 1,109 of these fledgling businesses in distress compared to 845 at the end of 2020.
Shaun Barton, national online business operations director at Real Business Rescue, said: “The latest Q1 results demonstrate that for many SME and start-up businesses, the financial challenge of the pandemic will continue throughout 2021.
“The sector needs to stand firm in the hope that the unlocking roadmap begins to have a positive impact.”