Travel agents could start to struggle as consumers cut back on foreign holidays post-Brexit, a new report warns.
Independent insolvency firm Begbies Traynor expects exchange rate fluctuations to affect agents focused on booking holidays abroad.
It says agents may struggle to make ends meet as holidaymakers cut back on increasingly costly international travel.
A total of 921 UK travel agencies were suffering from ‘significant’ financial distress in the second quarter of 2016, up 2% compared to the same stage last year, Begbies Traynor revealed.
However, the domestic travel industry is expected to be one of the first sectors of the economy to benefit from the Brexit fallout, as the weak pound makes the UK a more desirable and cost effective holiday destination.
While much of the UK economy is expected to be negatively impacted by the Brexit vote due to increased uncertainty and rising concerns over job security, the report predicts that the British tourism industry will be one of only a handful of sectors to immediately benefit from the referendum decision.
The ongoing sterling weakness against the euro is expected to add an extra £245 to the cost of a European getaway for the average British family, making holidays in the UK even more appealing for both domestic and international travellers, according to recent reports.
Begbies Traynor’s Red Flag Alert research for the second quarter, which monitors the financial health of UK companies, shows that the UK tourism industry was already in a state of improving financial health in the three months leading up to the Brexit vote, with levels of financial distress falling across UK-focused travel and leisure businesses.
The research shows that during the past quarter, ‘significant’ financial distress among UK hotels and accommodation fell 4% (down to 3,382 struggling companies), decreased by 3% among companies focused on leisure and cultural activities (5,464 companies) and fell by a further 4% within the wider British travel and tourism sector (3,791 companies).
Begbies Traynor partner Julie Palmer said: “Despite the typically unpredictable British weather over the past three months, our data shows that levels of ‘significant’ financial distress actually decreased across all key sectors of the UK tourism industry in the lead up to the Brexit vote, suggesting the sector is in rude health ahead of its vital summer season.
“Since then, while most sectors of the economy have started to batten down the hatches to wait for the Brexit storm to blow over, in contrast the UK’s domestic travel and tourism industry is expected to be one of the first sectors of the economy to see tangible financial benefits from the referendum result.
“The significantly weaker pound has already made international travel for British families so much more expensive, which should encourage more to favour staycations on home soil.
“Meanwhile currency fluctuations have also made travel to the UK from Europe and the US in particular more affordable, helping incoming tourists to get a lot more bang for their buck.”
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