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Published: 08/03/2010

Profits and confidence slump in hospitality sector

Confidence levels about business prospects for the next six months have fallen sharply for hospitality and leisure firms, according to research from Santander Corporate Banking.

The figures show 42 per cent of firms suffered profit falls in the past six months with 27 per cent recording increased profits. The Santander Corporate Banking Business Confidence Index reveals that 71 per cent of hospitality and leisure company owners are confident in the prospects of their own business for the first half of 2010, significantly lower than the 89 per cent who were optimistic when the research was first conducted in September 2009.

Almost one in 16 (6 per cent) firms are very confident while 65 per cent are confident about the future with 29 per cent not very confident. Confidence among firms in the hospitality and leisure sector is slightly below the national average which showed that 74 per cent of firms were optimistic about the next six months.

But confidence is higher among firms with turnovers of £25 million plus – 81 per cent of these firms say they are either ‘very confident’ or ‘confident’ about their prospects and report average profit rises in the past six months of 14.1 per cent. National analysis shows the continuing squeeze on profits is holding back confidence – 50 per cent of companies say profits fell in the second half of 2009 compared with 21 per cent which reported an increase.

The average profit fall in the past six months is 16 per cent compared with the average rise of 13.7 per cent. Profit decreases were highest among firms with an annual turnover of less than £1 million.

In the hospitality and leisure sector 42 per cent of firms have reported declines in profits while 27 per cent have seen rises. The average fall in profits is 12.7 per cent while the average rise is 12.3 per cent. Steve Pateman, head of Santander Corporate Banking, said: “Confidence remains relatively high among hospitality and leisure firms although it has certainly been knocked in the past four months by the continuing squeeze on profits. The official end of the recession marks a turning point but sustained recovery and growth will be challenging, requiring support from the banking industry.”