Brexit, Cash Flow Problems and Solutions and Lowcost Travel Group
Lowcost Travel Group and Cash Flow Problems
It’s only just over a month since the Brexit Referendum. There is a great deal that will happen over the next few months that has implications for businesses. However, as in the case of the recent administration of Lowcost Travelgroup, there is some evidence to suggest that certain industries are more susceptible than others to the current financial uncertainty, which can lead to severe cash flow problems. This article looks at the likely cash flow problems that were experienced by Lowcost. It goes on to suggest possible solutions for businesses experiencing similar difficulties.
What Happened to Lowcost Travelgroup?
Lowcost Travelgroup ceased trading and went into administration on 15th July 2016. 27,000 customers were on holiday in resorts booked through them. In addition, a further 110,000 bookings were on the books.
We understand that the firm had made significant attempts to turn things around, but that all efforts had failed. It seems that uncertainty pre and post the Brexit referendum produced serious cash flow problems (and other financial difficulties) to which a solution could not be found for in time. It is believed that 120 jobs in the UK alone will be lost.
Why Are Travel Companies Particularly Susceptible to Cash Flow Problems?
Lowcost Travelgroup was in the business, essentially, of selling hotel beds, at the budget end of the market. Such a market is highly competitive with very low margins and is reliant on high volumes and fast turnover. Quite often, the cash received in advance for future bookings is used to pay hotels the money owed for holidaymakers already on holiday.
This business model is fine under conditions of high demand, good levels of financial certainty and, of course a strong £. However, as in the case of Lowcost Travelgroup, when there is a dip in confidence as there was before and after the referendum, the problems started. This saw holidaymakers delaying decisions, followed by a fall in the value of Sterling against the Euro. The severity and speed of the resulting cash flow problems can be enough to send a company down, very quickly.
Indeed, we have already seen two other travel companies go into liquidation recently. One of these, Anatolian Holidays from Solihull, specialising in holidays to Turkey has blamed the current political instability for its demise.
Cash Flow Problems and Solutions – what can be done?
The causes of cash flow problems are many, ranging from demands from creditors for payment, Bad Debts, difficulties collecting the money owed to you, flawed trading forecasts and funding and finance problems.
Here at Business Recovery Specialists we can help if your business has a cash flow problem. We come up with a plan for a solution before going on to help you implement it. Even when all hope seems to have gone. The sooner you talk to us, the more we can help your business to recover as a going concern
We’ll be delighted to have an initial discussion on how we can help your business recover.