West Midlands hospitality businesses at highest risk of insolvency

Après and Mechu

The financial resilience of the West Midlands tourism sector is being tested, with a new study concluding that 30% of regional operators are at an above average risk of insolvency.

This is the highest percentage of any region in the UK and is close to three points above the national average (27.2%).

The situation is borne out by several restaurant and nightclub closures in Birmingham in recent weeks as the hospitality market contracts.

The statistics form part of insolvency and restructuring body R3’s monthly sector tracking report, which also reveals an uncertain outlook for some West Midlands hospitality businesses.

The study, compiled using Bureau Van Dijk’s Fame database, concludes around one-in-five hotels (20.4%) in the West Midlands currently has a higher than normal risk of insolvency which again, is one of the highest ratios in the UK. Only the South East has a greater proportion of hotels with an increased risk of insolvency.

More positive news for the region indicates that the West Midlands construction sector is among the UK’s top regional performers, with fewer than one-in-four (23.6%) businesses operating with an above average risk of insolvency. This percentage is surpassed only by Northern Ireland.

Furthermore, the region’s manufacturing sector is among the top three most financially secure in the UK – outperformed only by Yorkshire and Northern Ireland – with fewer than one-in-five (19.2%) at higher than average risk of insolvency.

Commenting on the research, R3 Midlands chairman Chris Radford, a partner at the Birmingham office of law firm Gateley, said: “These statistics paint a mixed commercial picture for the region. The situation won’t necessarily be helped by predictions of economic growth by leading forecasters, as businesses are now facing the effects of rising inflation hitting households and the uncertainty surrounding Brexit.

“R3 advises that the monitoring of finances should remain a priority for business owners as they seek to weather all eventualities. If cash flow becomes a major challenge, it is imperative to seek professional advice sooner rather than later. Never be tempted to stick your head in the sand.”

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