Hospitality sector business survival rate lower than average

31-Oct-2012 - Last updated on 11-Mar-2017 at 23:20 GMT

Related tags Economics Business Management

Just half of hospitality sector operators on the verge of banruptcy

The survival rate among pub, restaurant and hotel businesses that were on the brink of collapse in 2006 was significantly lower than the average among troubled UK firms, new figures show.

An analysis of c44,000 companies that were on the verge of bankruptcy in 2006 found that 63% survived into 2011. However, for pub, restaurant and hotel operators, the figure is just 51%.

The research from Experian shows that overall, half of businesses that survived managed to turn their fortunes around and significantly improve their overall financial health.

Of those businesses that survived, 13% increased their employee base as well as significantly improved their overall financial health while 37% improved the financial performance of their business whilst either maintaining or reducing the number of employees. Overall, 36% of businesses that were close to bankruptcy in 2006 went on to increase employee numbers over the next six years.

The research found that survival rates increased as businesses get bigger. A business with one employee has a survival rate of 58%, compared to 80% for firms with more than 100 members of staff.

However, if micro businesses do survive, they are more likely than others to transform themselves into having excellent health. The proportion of firms that survived after 2006 and had a “true turnaround” - with improved financial health and increased number of employees - was the highest (18%) for firms with one employee. For companies with 250 or more members of staff, the proportion was 8%.

Craig Boundy, managing director of Experian UK & Ireland, said: “Our study highlights the resilience of British companies and business leaders who were able to come off the ropes despite being on the brink of bankruptcy in the midst of a flat-lining economy.

“Micro businesses with five or less employees have shown particular adaptability through a period of unprecedented challenges to the economy. Almost one in five businesses with one employee managed to completely turn their organisation around. This is surprising when you consider that a micro business has little flexibility; there are no other employees and overheads are usually low anyway."