Hospitality hit hard by insolvency

02 August 2010
Hospitality hit hard by insolvency

The hospitality industry was one of the worst-affected sectors during the recession, an analysis of business failures has revealed.

R3, the insolvency trade body, compared the number of insolvencies in each sector with the number of businesses within that sector before the recession began.

It found that the hotel and restaurant industry suffered the most, with 1.7% of businesses becoming insolvent during the recession as consumers tightened their belts and companies cut back. Manufacturing followed close behind at 1.6%

Frances Coulson, R3 vice-president, warned that the worst could be yet to come as previous recessions had pointed to an "insolvency lag".

"This ‘lag' has been a typical feature of past recessions when insolvencies rise during a recovery as creditors stand to achieve greater returns and weakened business have used up their returns to stay afloat," she said.

Coulson added that it would take until the end of 2011 before it became clear that there was still a lag to work its way through.

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By Daniel Thomas

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