The UK's economy felt the force of the Covid pandemic and that has
led to serious ramifications for its TMC sector too

The UK fared worse than most countries in terms of the economic hit of Covid-19 and, being one of countries most connected by air in the world, it suffered when borders slammed shut.

Figures from the Office for National Statistics revealed just how hard hit the travel sector in the UK has been. In May 2020, turnover in travel and tourism businesses fell to just 26.0 per cent of February levels, compared with 73.6 per cent in all other industries. However, travel agency businesses saw the sharpest decline in turnover, falling to 9.3 per cent of their February levels in May.

The plummeting turnovers in the travel agency sector were further evidenced in research by Travelogix that looks at some 10.5 million transactions made by TMCs in 2019 and 2020. The company reported that the 7.8 million transactions by its clients in 2019 had fallen to just 2.71 million in 2020. Worse still, the company’s research found that average transaction value fell by 64.2 per cent from £296.50 in 2019 to just £106.12 in 2020. In October 2020, the average transaction value fell below zero, reflecting the unsustainable effect of refunds on an industry that is based around transactions.

It was no surprise then when, in October 2020, the Business Travel Association launched a rapid consultation into TMC remuneration models, which looked at subscription models such as those offered by Netflix as a potential way forward which would reduce the dependence on transaction fees.

It is not an easy change from one remuneration model to another. On the face of it, it could look like you are paying more

BTA chief executive Clive Wratten said at the time, “It is not an easy change from one model to another. On the face of it, it could look like you are paying more. When talking to corporate buyers, there is an appetite for the ability to choose what services they have and feel they might get better value for it."

There was good reason for TMCs to be concerned as they fell through the cracks of government support. While the furlough scheme covered people’s salaries if they were not working, the TMC sector had a huge amount to do in order to repatriate travellers and process refund requests.

The support governments around the UK gave the travel sector was uneven too. Holyrood approved a £5 million lifeline for Scottish agencies in December. A scheme followed for Northern Irish agencies in March 2021, but no such support has been forthcoming in England.

In August, BTA chief executive Clive Wratten wrote to the government calling for targeted financial aid to cover TMC employees’ salaries, a 12-month business rates holiday and a 12-month suspension of Air Passenger Duty.

In the event, in November, the furlough scheme was extended into 2021 but other measures were not, leading to ABTA chief executive Mark Tanzer to say “It is time this government stepped up and supported the UK travel industry”.

He added, “Other sectors that have been hit hard by the pandemic have received tailored support from the government – but travel has been left waiting in spite of clear evidence of the harm that is being done. While the extension of furlough may seem positive on the face of it, it needs to be much more flexible for it to make a difference to jobs and businesses in the travel sector. Taking into account that staff will have to work on re-bookings and refunds but won’t be generating any income.”

It was perhaps inevitable that some TMCs would not be able to make it through. Business Travel by STA ceased trading in August 2020 followed by Thornton’s Travel in October. The next month oil and gas specialist TMC Horncastle Executive Travel closed its doors for good too, and that wasn't the end of it.

What the future holds for the TMC sector in the UK will depend largely on the vaccine rollout in the face of new variants of concern of Covid. International travel did reopen on 17 May but with many of the key demands of the sector unmet – no reopening of travel between the UK and the US, by far the most important business travel corridor. The traffic light system did include a number of countries for which quarantine was no longer required but the number was limited and still required travellers to undergo expensive testing.

The increased levels of M&A activity in the TMC sector this year suggests that some TMCs can no longer afford to wait for business travel’s recovery

The announcement prompted Scott Davies, CEO of the Institute of Travel Management to say: "It’s encouraging to hear that the government’s global travel taskforce recognises the importance of meeting face-to-face, that international travel reunites people and is crucial to rebuilding the UK economy. The announcement of the 12 green list countries is a very tentative step towards unlocking travel [but it] is primarily going to benefit the leisure travel industry."

He added: "It’s not going to make much difference to the business travel sector. The traffic light system and its different testing, quarantine and isolation protocols are complex and will deter companies from booking business travel unless it’s absolutely essential. Nevertheless, it is a step in the right direction towards facilitating business travel. But there’s still a way to go in terms of vaccination programmes and consistent Covid testing regimes globally to ensure the safe return of significant levels of business travel."

The increased levels of M&A activity in the TMC sector this year suggests that some TMCs can no longer afford to wait for business travel’s recovery.

Discover the background to Europe’s multinational TMCs whose presence span the continent, read analysis of the UK, French and German TMC markets, and explore the mergers and acquisitions reshaping the industry