Hospitality and leisure insolvencies up 8.6% year-on-year

By Luke Nicholls

- Last updated on GMT

Related tags Insolvency

The Experien business insolvency index found that there were a total of 151 insolvencies in the leisure & hotel sector (which includes pubs and restaurants) last month
The Experien business insolvency index found that there were a total of 151 insolvencies in the leisure & hotel sector (which includes pubs and restaurants) last month
The number of restaurants, pubs, hotels and wider leisure businesses that went bust in May was up by 8.6 per cent against the same month in 2011, according to the latest business insolvency index from Experian.

The report discovered that there were a total of 151 insolvencies in the leisure and hotels sector last month. The increase from April was driven primarily by firms falling into the smaller categories - those up to 25 employees.

Max Firth, UK managing director for Experian’s Business Information Services division, said: “By the time a firms grows to six to 10 employees, the flexibility it benefited from as a micro business begins to disappear.

Fixed overheads become greater and cash flow starts to cause more serious issues if not carefully monitored. Our data has shown that historically, the highest insolvencies have consistently been experienced by firms that have between 10 and 100 employees.

“If a good credit management process is not implemented before reaching this size, then a firm may find it significantly harder to keep its head above water as it grows.”

The regions

Firms with six to 10 employees saw their rate increase from 0.17 per cent in May 2011 up to 0.2 per cent in May 2012. This is the first time that firms of this size had experienced the highest rate of insolvencies of all, compared with their larger and smaller counterparts.

Yorkshire was the only region in the UK to see its rate of insolvencies fall - from the highest rate held by any region during May 2011 of 0.13 per cent, down to 0.11 per cent last month.

Four areas saw an increase in their insolvency rate from May 2011 to May 2012: the North East, Scotland, the East and the South West. The North East region experienced the highest increase in rate of business insolvencies, from 0.09 per cent in May 2011 up to 0.14 per cent last month.

The sector's ‘financial strength’ score, which predicts the likelihood of business failure in the next 12 months, actually increased against May 2011. The industry’s score was 82.62, up from 82.02 in May 2011 (with 100 being the least likely to fail).

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