26 Apr 2020
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For the first time in 3 long months and thanks to the success of the vaccination roll out, non-essential businesses re-opened their doors this month. There are queues everywhere as we all try to get our shopping fix while adhering to social distancing guidelines. Hairdressers have naturally been overwhelmed with customers desperate to say goodbye to their lockdown locks and this long-overdue trip to the hairdressers inevitably leads to a chat about holidays and travel plans for 2021. What’s happening with businesses across the UK and more specifically with international travel?
The number of companies in significant financial distress has risen at the fastest rate in more than seven years. Almost 100,000 more businesses were found to be significantly distressed in Q1 of 2021 compared with the previous quarter. According to data from insolvency company Begbies Traynor, more than 720,000 businesses spanning all 22 sectors they analysed are now struggling. The 15% rise from the previous quarter represents the greatest increase since its research began in 2014 and highlights a broad and deteriorating financial situation as the UK starts to exit from economic lockdown.
What does this mean for holidays abroad and how will travel and hospitality recover from the drought of the last year? Currently, there are 40 countries on the red list that we’re banned from travelling to. If you’ve been in, or through any of those countries, you’ll be refused entry to the UK. If you’re a British or Irish National, or you have residential rights in the UK, you’ll be able to enter but you must quarantine in a government approved hotel for 10 days.
As part of step 3 in the government’s plan, the traffic light system will come into force on May 17th. Individuals travelling from the UK to a green destination will need a UK pre-departure test and once they’ve finished their holiday and are planning to return to the UK, they will need another pre-departure test in that country, followed by a post-arrival test in the UK. With a UK PCR test costing £128 per person on average, a family of 4 could be looking at a bill in excess of £1,200 before they’ve even started on actual holiday costs! There will also be a requirement to quarantine for 10 days at home after returning to the UK from an amber country and if you’re coming from a red country, you’ll need to pay for a 10-day stay at a government managed quarantine hotel, costing you around £1750. A trip abroad is starting to look like a very pricey and problematic luxury.
If you can work from home, a 10-day quarantine might be feasible, but for those who can’t, will a holiday that has to be extended by 10 days even be a viable option? Holiday costs are also on the increase as capacity has reduced significantly and travel companies try to make back some of the monumental losses they’ve sustained over the last year. Are the days of the bargain break over?
And what about demand? Any change to a virus, no matter how small, is classed as a different variant. We’ve seen many variants in the last year originating from countries around the world. The two main worries of new variants are the possibility of increased transmission and the efficacy of the vaccine against the new variant. Concern will drive behaviour, putting some people off international travel altogether. The younger population may be more likely to travel; they’re less concerned about the effects of the virus, more relaxed about socialising and they have more wanderlust. Their desire to travel and spread their wings may just save the sector and drive future growth.
How are travel companies responding to the ever-changing situation? The Save Future Travel Coalition has written to the Chancellor, Foreign Office, and the Chair of the House of Commons Transport Committee about the restart of international travel and the need to support the travel industry throughout the recovery. The Coalition is made up of 15 leading travel associations and trade groups and they’re asking for industry-specific support from the government; the retention of the existing furlough and self-employed income support for businesses operating in international travel for a minimum of six-months from 17th May, the extension of full business rates relief for travel companies and the creation of a new sector-specific ‘recovery grants’ regime. And with the cost of UK PCR tests being double that of testing in Europe, they’ve asked HMRC to look at reducing the cost of testing by exempting PCR tests from VAT. Clarity on the approach to Foreign Office travel advice around the restart of international travel has also been called for.
In the next month, it’ll all be about the numbers. What will the trade-off between serious illness, the economy, social contact and mental health look like as we move forward? Will nirvana be achieved on the 21st June when the government hopes to remove all legal limits on social contact? Many would say it seems highly unlikely…
Let’s face it, the industry is in a precarious position. The changes on the 17th May will help but there’s still so much ambiguity and uncertainty and many people may not be able to afford or be willing to take the risk of international travel this year. From an investors’ perspective and in the absence of a crystal ball, it’s incredibly difficult to get a handle on what the future looks like for this sector.
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