Although the latest figures from the Insolvency Service showed that company insolvencies have dropped to their lowest level since the end of 2007, there has been little cause for rejoicing in the travel sector, where the number of firms entering insolvency has doubled over the last 12 months.
Figures taken from court statistics show that between 1 October 2011 and 30 September this year, 86 agencies and tour operators became insolvent, up from 40 in the 12 months before that.
Unfortunately, many travel firms had already been struggling and needed an exceptional 2012 to survive and while the year’s celebrations, such as the Queen’s Diamond Jubilee and London 2012 did much to raise the spirits of the nation, many Britons decided to stay at home and party rather than travel.
Also, many popular holiday destinations, such as Greece and Egypt, have been beset with their own political and economic problems and so the instability in these regions seems to have put travellers off.
Coupled with escalating fuel prices and more people using the internet to do research and organise separate flights and accommodation, and the financial woes of travel package companies are bound to escalate. Even major tour operator Thomas Cook issued profit warnings throughout 2011, and was forced to restructure in the spring to avoid breaching banking covenants.
While the double-dip recession, from which the country has only just emerged, has meant that consumers are saving their money for essentials rather than splashing out on holidays abroad.
The Insolvency Service has also indicated a slight increase in the number of individuals becoming insolvent during the third quarter since earlier this year, although the figures showed a 7.2 per cent improvement from the same period in 2011.
Tim Close is an accountant specialising in business insolvency, debt recovery and business rescue.