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Leisure and hotel insolvencies increase by 8.6% year-on-year

Leisure and hotel insolvencies increase by 8.6% year-on-year

The number of leisure and hotel businesses that failed in May was up 8.6% against the same period last year, according to the business insolvency index from Experian.

The report found that 151 businesses in leisure and hotels went bust, the second highest sector after building and construction, which saw 303 insolvencies.

But the failure rate for the total business population remained flat year-on-year, with a slight increase from the April 2012 figures.

The increase from April was driven primarily by firms falling into the smaller categories - those up to 25 employees.

In particular, firms with 6 to 10 employees saw their rate increase from 0.17% in May 2011 to 0.20% in May 2012, which Experian said was the first time that firms in this size-band had experienced the highest rate of insolvencies of all, compared with their larger and smaller counterparts.

Max Firth, UK managing director for Experian's business information services division, said: "By the time a firm grows to 6 to 10 employees, the flexibility it benefited from as a micro business begins to disappear.

"Fixed overheads become greater and cashflow 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."

Yorkshire was the only region to see its rate of insolvencies fall - from the highest rate held by any region during May 2011 of 0.13% down to 0.11% in May 2012.

Four UK 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% in May last year to 0.14% in May 2012.

By Janie Manzoori-Stamford

E-mail your comments to Janie Manzoori-Stamford here.

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