DOOMSDAY FEARS FOR OUR WORLD OF PLEASURE
NEARLY half of the leisure and travel businesses in Britain are at “serious risk of failure” due to coronavirus, according to experts.
Analysis of the latest data found 61,370 companies in this sector – 49 per cent of the total – were in jeopardy of failure prior to the outbreak.
The total number of company failures across the whole economy last year was just over 17,000.
The figures from the corporate health monitoring group Company Watch revealed that restaurants are most at risk, with 59 per cent classed as at risk, followed by pubs and clubs at 57 per cent.
Both groups were already struggling due to the slowing economy, before customers started to isolate themselves because of Covid-19.
Events catering groups were in third place, with 51 per cent in danger. Opus Restructuring business risk adviser Nick Hood said: “These are desperate times for businesses dependent on discretionary consumer spend, as the impact of coronavirus spreads like commercial poison through the economy.
“With some seeing their revenues fall off a cliff, all they can do is cut their costs to the absolute barest minimum, hunker down and hope the storm passes as quickly as possible.
“It’s also essential that their creditors and landlords are patient, however painful that may be for them.”
Matt Dunham, of the insolvency practitioners’ trade body
R3, said that business recovery and restructuring groups were getting more calls from worried company bosses as they can “see problems coming up ahead”.
He said: “There are lots of over borrowed businesses and “zombie” companies which have been struggling on because conditions have been benign.
“There is going to be one hell of a shock, no matter how robust your business plan is, no business expected this.
“The effects will come and be felt across all sectors.”
Last week scores of companies, from across all sectors, warned of the catastrophic effect Covid-19 is having on business.
The high street has already been badly affected with footfall down 9.4 per cent.
British Airways warned it is in a fight for its survival, while lowcost rival Norwegian had to be bailed out by its government. Saga has cancelled all cruises
‘All they can do is hunker down’
until May, a move that will cost it £15million.
Cineworld has warned if the virus causes it to lose two to three months of revenues, it will breach the terms of its loans.
Sporting events, such as professional football,
Six Nations rugby and even the London marathon, have been postponed, putting all the small businesses that depend on them in peril.
In last week’s Budget, Chancellor Rishi Sunak pledged £30billion to help fight the coronavirus and spare businesses its worst effects, as well as boosting public spending by £175billion.
At the same time, the Bank of England cut its base rate to a record low of 0.25 per cent and unveiled a £300billion stimulus package. However Karim Haji, head of financial services at accountancy giant KPMG, said that while the coordinated package from Mr Sunak and the Bank’s response was a “good opening salvo”, more action may be needed.
He said: “We cannot underplay the challenge at hand here. A huge proportion of UK businesses face significant cashflow pressures and without cash, firms can’t survive for long.” Panicked Britons have raided supermarkets, cleaning them out of items such as toilet roll, hand sanitiser and pasta. So far people have not resorted to hoarding cash but banks are preparing fall back options to make sure ATMS do not run empty, in case that starts to happen. A spokesman for the bank’s trade body, UK Finance, said:
“The UK cash industry has contingency plans to deal with a range of scenarios, and these are being constantly refined.
“The industry is closely monitoring developments and will work hard to ensure customers can continue to pay in a way that suits them.”
‘The industry will work hard’