Tourism and hotel businesses facing increased distress

Businesses facing severe distress have risen by 12 per cent during the last quarter, according to the latest Red Flag Alert from administrators Begbies Traynor.

The report showed that consumer demand-based businesses, such as tourism and hotel accommodation, have been hit hardest, as the public remains cautious over the state of the economic recovery. Hotels and accommodation businesses facing 'critical' distress experienced a 47 per cent rise on the figures from the first quarter of 2011, while travel and tourism saw a 31 per cent rise.

The total number of businesses facing critical problems in the second quarter stood at 5,179 - up from 4,620 - with total liabilities of nearly £60 billion.

Julie Palmer, a partner at Begbies Traynor, said, "The austerity measures mean the Government is finding it difficult to give second chances or extend its support to business owners that have chosen to use their money for another purpose and as a result, the number of winding up petitions issued by HMRC in quarter two 2011 has more than doubled since quarter one."

She explained that many companies in difficulty had taken advantage of HMRC's Time to Pay Scheme, but many failed to achieve a full turnaround and are now trying to seek time to pay arrangements for a second time.

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