The Risk of Insolvency in Birmingham’s Tourism Sector
Hospitality Businesses in Birmingham and the West Midlands as a whole have the highest risk of insolvency nationwide.
A recent study by the Association of Business Recovery Professionals’ (R3) monthly sector tracking report, has suggested that the risk of insolvency amongst West Midland’s businesses in the hospitality and tourism sectors is the highest in the UK. In this article we look at the findings of that report. As Business Recovery and Insolvency Practitioners based in Birmingham, we comment on the actions that businesses should consider taking if insolvency is looming.
The Findings of the Survey
Amidst the conflicting reports we are seeing about the economy’s growth prospects, especially now that Article 50 has been signed and delivered, R3’s study suggested that 30% of companies in the West Midlands’ tourism sector were at an above average risk of insolvency. This almost 3 percentage points above the average for the sector in the UK as a whole. It is also the highest figure for any region in the UK.
As evidence of this contraction of the hospitality market, several nightclubs and restaurants have closed in and around Birmingham this year. This seen as demonstrating an outlook that is uncertain for the sector in the region.
Taking the sub-sector of hotels, for example, the study shows that in this sector in the West Midlands, slightly more than 20% of hotels have a higher than normal risk of insolvency. Only the South East region has a larger percentage of hotels with an increased risk of insolvency.
How Does the Tourism and Hospitality Sector Compare to Other Sectors?
Despite this news, it seems that it isn’t all doom and gloom in the West Midlands. Two sectors: Construction and Manufacturing are performing very well.
The construction sector has less than 25% of businesses operating with a risk of insolvency that is above the national average. Only Northern Ireland performs better. Likewise the manufacturing sector in the West Midlands, where fewer than 20% of businesses are at a higher risk of insolvency than the national average, is only outperformed by Yorkshire and Northern Ireland.
What do These Figures Tell Us? Taking no Action is not an Option
Ever since the Brexit vote, we have been seeing a mixture of economic indicators. A fast growing stock market and more optimistic forecasts of GDP growth for 2017 and 2018 than initially forecast are offset by a weaker £, higher import costs and a rise in inflation. Uncertainty is perhaps the biggest concern, and as is always the case. Uncertainty can lead to delays in a whole host of business decisions. This can then impact on cash flow and other business critical markers. Once cash flow problems kick in, creditor pressure mounts and insolvency becomes more likely.
The data for the West Midlands shows that the risk of insolvency varies across sectors. However, that does not mean that now is the time for complacency whatever sector a business is in. As Insolvency Practitioners and Business Recovery experts, our first aim is to help those businesses at risk of insolvency take the necessary steps to avoid insolvency.
In our experience the sooner a business recognises the threat of possible insolvency and takes action, the better. The worst thing to do is sit and wait to see what happens. Contact us or call us on 0121 200 2962 for an initial discussion, if you are concerned that things are not moving in the right direction for your business.
