Register to get free articles
Want unlimited access? View Plans
Already have an account? Sign in
More than 1,800 hotels in the UK are at risk of becoming insolvent as a result of Brexit, according to research from accountancy firm Moore Stephens.
The company claims some thousands of properties have at least a 30% chance of going insolvent within the next three years as a result of the EU referendum vote in June last year.
The research highlights that although a weaker pound may encourage more tourists to visit the UK, and tempt more Britons to take ‘staycations’, visitors are likely to focus on “key tourist hotspots”, leaving hotels in other less popular locations struggling.
At the same time, food and beverage costs are set to increase as unfavourable exchange rates push up import prices, adding to already-rising overheads and tightening profit margins.
The introduction of the Living Wage will lead to further financial strain for small hotels outside cities, the company said. Many hotel workers are over the age of 25, meaning it could apply to as much as half of the hospitality workforce.
In addition, internet comparison websites have helped to increase price transparency in the sector and often charge hotels significant commission to be advertised on the site.
Moore Stephens said this additional cost and pressure to price competitively can put further financial strain on smaller hotels, which often operate on tight profit margins.
Competitors such as Airbnb and others operating in the so-called ‘sharing economy’ business model – which can keep prices low due not not being required to charge VAT – have also intensified pressure on room rates, often providing lower priced options in a wide range of locations.
The research also cites a decline in business travel, which it says has slowed down due to corporate budgets being squeezed in the wake of the referendum vote.
Jeremy Willmont, head of restructuring and insolvency, said: “Greater costs across the board as a result of the Brexit vote and competition from Airbnb are putting some hotels at risk of insolvency.
“The drop in the pound, and the increase in staycations since the Brexit vote has the potential to be a boon for the hotel industry, with more foreign tourists choosing to visit the UK. However, the benefits have yet to reach hotel companies right across the country.”
