In 2020, the FTSE travel and leisure sector – which includes restaurants and bars – set a new annual record for the number of profit warnings issued in a year, according to data from the latest EY Profit Warnings Report.
The sector issued 74 profit warnings in 2020, nearly three times the previous annual record of 28 warnings in 2018.
Notably, EY’s data shows that a high proportion of the FTSE travel and leisure sector are at risk of insolvency.
In 2020, 16 per cent of companies in the sector issued their third or more profit warning in a 12-month period, behind only FTSE retailers at 19 per cent.
This compares with five per cent of all UK-listed companies, and ten per cent of the UK-based companies in the FTSE 350.
Typically, up to one in five of these companies enter administration within 12 months.
Christian Mole, EY UK&I head of hospitality and leisure, commented: “The FTSE travel and leisure sector has endured one of the most challenging years on record.
“Recovery is expected but at varying speeds and degrees across the sector.
“Significant pent-up consumer demand will result in activity resuming relatively quickly for those businesses which primarily cater to the domestic consumer market.
“Non-city centre pubs and restaurants in particular are expected to benefit from this demand – especially restaurants that are likely to get a boost from the steady reduction in outlet numbers during the last two years.
“We also predict the uptick in staycation demand, seen last summer, to be repeated this year.
“The prospects for domestic business and international travel are more uncertain and we expect a lag for businesses which focus on these sub-sectors.
“Feedback from hospitality leaders suggests that the majority do not expect consumer and business demand to return to pre-Covid-19 levels until 2024, and there is significant doubt over whether business travel volumes will ever fully return.”
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