More than 2,200 small and medium-sized tour operators and travel agencies were in ‘significant financial distress’ at the end of last year, according to analysis by corporate restructuring experts.
Begbies Traynor-owned Real Business Rescue’s Business Distress Index found a total of 620,000 SMEs in the UK were in financial distress – up 14% in the last quarter of 2020.
It found 787 tour operators were in ‘significant distress’ at the time of its research, up from 618 in at the same time in 2019 – a 27% increase.
As many as 1,448 travel agencies, reservation services and related firms were in ‘ significant distress’ in Q4 2020, according to the company, up 33% from 1,091 in Q4 2019.
At the end of the third quarter of 2020, 657 tour operators and 1,243 travel agencies were in ‘significant distress’, the analysis found.
When Real Business Rescue looked at the wider ‘travel and tourism’ sector, which includes land transport, railway transportation, bus and coach operators, tour guides, air transport and sea and coastal passenger transport, it found 4,544 companies in ‘significant distress’.
Between the 4,544 companies, it said 27,000 jobs were in danger as a result of the financial difficulties.
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.
Shaun Barton, national online business operations director at Real Business Rescue, said: “These latest results demonstrate that, for many SME and start-up businesses, the financial challenge of the pandemic remains in place.
“This continues the trend we have seen since the health crisis first struck back in March.”
He added: “The travel and tourism sector continues to be hit hard due to the drop off in consumer demand and restrictive lockdowns that remain in place. With no end in sight, the industry is fighting for survival as it tries to navigate its way through until such times that travel and tourism operations can reopen fully again.”