A third (33.3%) of Welsh tourism operators* are at heightened risk of insolvency in the next 12 months, according to research by R3, the insolvency trade body. This is higher than the cross-sector percentage of businesses in Wales at higher than normal risk (25.1%).
R3 uses research compiled from Bureau van Dijk’s ‘Fame’ database of company information to track the number of businesses in key regional sectors that have a heightened risk of entering insolvency in the next year.
Ross Connock, Chair of R3 in Wales and Director at PwC, comments:
“When the last recession hit, travel and tourism was one of the first sectors to be affected. It operates at the mercy of changeable consumer habits, centred around disposable income, general consumer confidence and evolving booking methods. It can also be affected by unpredictable natural disasters, political unrest, health epidemics, terrorist activity and the weather.
“Add to this the fact that the high street is still working to re-define itself, competing with online offerings, this is a sector that requires a lot of care and attention.
“Hopefully Wales will have a good summer season, which will bring with it high tourist numbers and greater stability for the sector. Those struggling should to seek qualified advice early as it can make all the difference to their survival. In 2013-14, the UK insolvency profession gave advice to around 70,000 businesses. Of those that worked with an insolvency practitioner in a formal insolvency procedure – about 6,700 – 41% were able to continue afterwards.”
Individual insolvency and tourism
Recent figures released by the Insolvency Service show that many of the areas with the highest individual insolvency rate per 10,000 people are in local authorities with seaside resorts, including Denbighshire (Rhyl), which had an insolvency rate of 43.3 per 10,000 adults in 2014, the highest in England and Wales.
Ross comments: “The high rates can be understood in terms of the labour markets in these places, which often have higher unemployment rates, or seasonal and short-term job opportunities. Many coastal towns in Wales may struggle with a reliance on tourism, which as a seasonal industry can be an unpredictable provider of work.”