Analysis of more than 2.2 million UK business records has shown the average credit score of those in the travel sector sunk to a new low this autumn and, not surprisingly, that the sector has fared the worst of all during the pandemic.
The report from credit rating analyst Experian found the average score of the 9,038 travel businesses it reviewed – which included agencies, operators and other booking services – had fallen to a low of 30.5 in September 2021, a drop of 30.7 per cent compared to March 2020.
Experian says a business credit score is the measure of a company’s creditworthiness, which is made up of a number of factors, and is intended to indicate the financial position of the organisation and its level of financial risk. According to its business credit score index, a score of between 26 and 50 means an organisation’s financial position is ‘above average risk’.
The overall average credit score of the 2.2 million UK business records that Experian analysed in September had returned to the pre-pandemic average of 44, compared to an average score of 40 throughout most of the pandemic.
Experian said the UK’s retail sector has ‘shown resilience’, increasing 19.2 per cent to 31 and leaving travel bottom of the rankings, while manufacturing emerged with an average credit score of 57 – compared to 55.9 a year ago – which is considered ‘below average risk’.
The automotive sector posted an average score of 49 and the advertising and market research sector a score of 32.
The report noted that travel businesses are expected to “continue to struggle” and that the sector has not enjoyed the recovery in credit scores seen across most others, where scores have reached pre-pandemic levels “in a much shorter period of time than it took for them to fall”.
James McGarva, managing director of business information services at Experian, said: “Despite ongoing pressures presented not only by the impact of Covid-19, but also other well-documented macroeconomic pressures such as labour shortages and global supply chain issues, the ability of businesses to adapt has been impressive.”
He added: “By looking at business credit scores on a national scale, we can see how many businesses’ financial circumstances are improving, presenting a lower risk for lenders and therefore enhancing their prospects of getting access to the finance they need to thrive.”
Despite the improving picture for the wider economy, travel businesses have been hit by the latest round of travel restrictions introduced following the spread of the Covid-19 Omicron variant.
Many travel industry organisations have expressed their dismay at the reintroduction of PCR tests on arrival in the UK and of testing before travelling to the UK, with ABTA among those calling for new financial support for the sector.