Hotel and licensed trade insolvencies fall… but it may just be a ‘blip'

08 August 2011 by
Hotel and licensed trade insolvencies fall… but it may just be a ‘blip'

Administrations in the hotel and licensed trades have fallen by a third, defying sluggish consumer spending, but experts have warned the recovery could be just a "blip".

Figures showed a 31% drop in insolvencies for the second quarter of 2011, compared with the first. Meanwhile, they were down 9% on the same period last year.

Insolvency experts Baker Tilly said the news flew in the face of predictions that the sector would continue to be hard hit by factors affecting consumer confidence and spend.

But Mark Wilson, partner at Baker Tilly Restructuring and Recovery, warned that the improved indicators, which have seen insolvencies in the sector fall back to levels last seen in the first quarter of 2010, may not last.

"The concern is that this could be just a blip. With expected belt tightening arising from general economic uncertainties and an apparently weakening jobs market, it is difficult to see how discretionary spend is going to hold up in the short to medium term," he said.

"Those licensees that have survived the past few years have evidently become more savvy to the needs of their market. The figures demonstrate many have overcome the double whammy of a traditionally quiet trading period and the increase in VAT in Q1, perhaps having taken full advantage of the additional bank holidays and unseasonably good weather at the start of Q2.

"However, given the fluctuations in the Eurozone and wider European market, it is likely to have an impact not only on the UK market but tourism as well, owing to spending being reined in elsewhere. It is hard to predict what the future holds but we are likely to see a truer picture in the latter half of the year."

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By Neil Gerrard

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