Research from property developer, Stripe Property Group, has shown that having rebounded from a pandemic dip of 24% in 2021, the market size of the UK holiday accommodation sector grew by 21% last year, with the sector expected to benefit from further growth in 2023.

Barrows and Forrester analysed the market size of the UK holiday accommodation market based on revenue and how this sector has grown over the last decade.

The research shows that today, the estimated market size of the sector is £2.54bn, having grown by an impressive 38% over the last decade, from £1.8bn in 2013.

However, this growth may have been even more impressive had the pandemic not brought the tourism and travel sector to its knees, as in 2021, the market size of the UK holiday accommodation sector reduced by 24% in a single year.

This was just the second annual reduction seen over the last decade and saw total market size fall from its peak of £2.76bn in 2020 to less than £2.1bn in 2021.

The good news is that a return to normality has helped boost the sector, with an immediate 21% bounce back in 2022 pushing market size back to £2.5bn.

It’s estimated that in 2023, the sector will grow by a further 4%, however, the expected £2.6bn will remain some 4% below the pre-pandemic peak.

Managing Director of Stripe Property Group, James Forrester, commented: “While staycations boomed in popularity during the pandemic, and continue to do so, the UK holiday accommodation sector was hit hard by the restrictions imposed on travel, not to mention every other area of life.

“However, the sector has shown promising signs of a return to form and this growth is expected to continue this year.

“It should certainly be a consideration for those looking to invest within the property market who might not wish to follow the traditional path of a residential development.

“Whether it’s holiday accommodation, purpose built student accommodation, or a commercial venture, there are a vast array of opportunities within the market for savvy investors who wish to diversify their portfolio.”

Small business confidence has slipped downward in the second quarter after a strong recovery at the start of the year, with FSB’s Small Business Index (SBI) headline confidence measure falling to -14.2 points in Q2 2023, down from -2.8 points in Q1.

The decline reflects the downbeat economic conditions small businesses had to navigate over the quarter, with stickier-than-expected inflation, while two base rate hikes added pressure to index-linked debt repayments.

Q2’s result is however more positive than the same quarter in 2022, when confidence plummeted to -24.7 points as energy prices surged in the immediate aftermath of Russia’s invasion of Ukraine and inflation climbed steeply, sparking the first wave of the cost of doing business crisis.

There were strong sectoral differences in confidence, with accommodation and food services falling by 18.1 points to reach -35.8 points, while wholesale and retail tumbled by 12.6 points to reach -37.8 points.

Manufacturing businesses were more or less in line with the all-sector confidence reading, at -14.5, almost exactly the same reading registered in Q1 (-14.4), while information and communication fell by 4.9 points to hit -19.6. Professional, scientific and technical activities, meanwhile, was the only major sector to reach positive territory, at 7.8 points, down 7.1 points from the first quarter.

Revenues over the second quarter among small firms were in line with the previous quarter, with one in three small businesses reporting that they increased (33%, compared with 34% in Q1), and two in five reporting that they decreased (41%, unchanged from Q1).

However, looking ahead, small firms’ revenue expectations have dampened, with only a third in Q2 (32%) expecting to see sales rise in the next three months compared to two in five in Q1 (39%), while a third (36%) expect to see a drop in sales, compared to a quarter in Q1 (26%).

The medium-term outlook was slightly rosier, with half of small firms anticipating growth over the next 12 months (51%), up from 46% in the first quarter. The proportion bracing for contraction remained steady, at around one in seven (14% in Q2; 13% in Q1).

Employment numbers shrank as more small firms saw labour costs increase in Q2. One in seven small firms said their employee numbers declined over Q2 (14%, up from 12% in Q1), while one in eight said their employee numbers rose (12%, unchanged from Q1).

Exports improved compared with the previous quarter, with the number of small firms who export reporting an increase in volumes (33%) notably higher than in Q1 (22%), while the proportion reporting a decline in exports (36%) was lower than in the first quarter (40%).

Looking at barriers to growth for all small businesses, the domestic economy remained the most-cited concern, noted by three in five small firms (61%, unchanged from Q1). Consumer demand ticked upwards as a concern, from 30% in Q1 to 36% in Q2, while – thankfully – utility and fuel costs declined notably as concerns, falling respectively from 33% to 25% and 13% to 8% between the first and second quarters.

Rising costs were an issue for the overwhelming majority of small firms, with 85% saying they had risen compared with the same period in 2022. This is a slight fall from the previous quarter, which registered a record high of 92%. Almost half (49%) of small businesses reported an increase in labour costs and one in five (20%) reported an increase in financing costs, up from 45% and 15% in Q1 respectively.

Three in ten small firms (30%) who applied for finance were offered a rate of 11% or more; in the same quarter last year, this was true for only one in eight firms (12%). Likewise, the proportion of small firm finance applicants who were offered a rate of up to 4% fell from over one in three (37%) to just one in 20 (5%) between Q2 2022 and Q2 of this year.

Martin McTague, FSB’s National Chair, said: “Although the upturn in small firms’ confidence from the first quarter didn’t carry over into the second quarter of the year, the message from our research is that small firms’ confidence in the future is looking rosier. Over half of all small firms expect to grow over the next year, for example.

“There are undoubtedly challenges ahead. Small firms are already feeling the impact of rate rises on their margins, and through lower consumer demand, and further increases will undermine the prospects of a recovery in confidence. Small businesses are very alive to the danger that interest rate rises will overshoot the level needed to curb inflation, and will instead act as a drag on economic expansion.

“Amid the rate rises and sticky inflation of the second quarter, and with economic growth underwhelming at best, it’s disappointing but perhaps not surprising that the momentum from the first three months of the year petered out somewhat – but small firms are survivors, and there are positive signs in our findings.

“The proportion of small firms saying that their cost of doing business was higher than in the same period last year has eased back slightly from last quarter’s record high, which resonates with the most recent inflation figures, and offers a small sign of hope that inflation may finally be on its way to being tamed.

“It is also very welcome to see energy and fuel costs falling in the rankings of small firms’ most-cited barriers to growth. Small businesses have shouldered huge cost burdens, with many seeing their energy bills soar, and we would once again urge all energy companies to allow small business customers to ‘blend and extend’ their energy contracts, to take advantage of lower wholesale prices compared with this time last year.

“Given the right conditions for growth, small firms have the potential to power a groundswell of economic activity. With the domestic economy the biggest perceived barrier to growth, however, they are in something of a catch-22 situation.

“The Government should get ahead of the curve, and take the summer to plan a programme for enabling small firms to grow and invest; tackling late payment in the official response to the recent late payment consultation would forge a path to an environment where late payments are all but eliminated.

“Taking concrete action on late payment would help to unlock confidence in the third quarter, especially with the end of the rises in the base rate perhaps finally in view.”

Allianz Trade, the world’s leading trade credit insurer, has launched a standalone fraud insurance product to help businesses combat the post-pandemic rise in employee fraud and external scams in the UK.

The new product covers internal fraud by employees, such as bribery, embezzlement and misappropriation or theft. It also covers external fraud including robbery, burglary, intercepted payments, payments made on the basis of a forged ‘order’, and impersonation fraud.

Impersonation fraud occurs when a criminal accesses a business’ email system or uses spoofing software to email employees with what appears to be a genuine email from the ‘CEO’ with urgent requests for payment. New figures showing CEO impersonation fraud rose by 6% to £13.4m last year.

In addition, £2.5bn was lost by UK residents and businesses due to fraud and crime in 2021, with 62,976 reports made by British businesses. It is also worth noting that 50% of UK businesses have been victims of fraud in the past two years.

Sarah Murrow, CEO of Allianz Trade in the UK and Ireland, said: “The time is right to launch this new standalone cover in the UK in response to economic changes and growing interest in the market. Post pandemic economic uncertainty and increases in the cost of living mean that businesses face a heightened risk of internal and external fraud.”

Steve Stennett, Commercial Director, Allianz Trade in the UK & Ireland, added: “Allianz Trade is already a key fraud insurer in Europe with more than 60 years’ experience in this market. Our comprehensive UK offering, built on our proven track-record in Germany, France, Belgium and The Netherlands will provide businesses with peace of mind when it comes to fraud and to concentrate on what they do best.”

What the Allianz Trade fraud insurance covers:

• Cover for losses caused by your own employees, including external workers, temporary staff as well as lawyers, tax consultants and auditors working for your company, through theft, fraud, embezzlement or damage to property;
• Cover against losses due to certain types of social engineering, i.e. fraud committed by assuming a false identity, such as fake president fraud;
• Cover for certain losses caused by third parties through acts of robbery, burglary, payment diversion and forged invoices;
• We cover costs for the continuation of business operations up to 6 months after the occurrence of the event of loss.

Allianz Trade’s fraud insurance product encapsulates a wide definition of ‘employee’, including full-time, part-time, temporary and contract workers. Social engineering is covered as standard, while there is unlimited retroactive cover for losses incurred prior to inception. Allianz Trade will also offer customers a dedicated team of fraud specialists to assess claims and provide support in the aftermath of a fraud loss.

UK-listed companies issued 66 profit warnings between April and June 2023, marking the highest second quarter total in three years, according to EY-Parthenon’s latestProfit Warnings report.

The report found that warnings from UK-listed companies have risen year-on-year for the seventh consecutive quarter, the longest run of consecutive quarterly increases since 2008. The highest number of Q2 warnings recorded by EY-Parthenon was in 2020, when 166 were issued.

In the last 12 months, 17.9% of UK-listed companies have issued a profit warning, the highest level outside the COVID-19 pandemic since the 2008 global financial crisis.

Persistent inflation and rising interest rates have played a significant role in Q2’s warnings, driving a tighter and more expensive lending environment. Changing credit conditions were cited in one-in-five (20%) profit warnings during the quarter, the highest proportion since Q2 2008 and up from one-in-ten (9%) in Q1 2022.

Elsewhere, falling sales were cited in 59% of profit warnings. Contractual issues or delayed payments were cited in 23% of warnings, as were rising costs and overheads.

The report also revealed a rise in the number of companies issuing multiple warnings. In Q2 2023, 29% of companies that issued a profit warning were doing so for at least the third time in 12 months, up from 10% in Q1. Consequently, the number of companies in the ‘three-warning danger zone’ has risen from 31 at the end of Q1 2023, to 36 at the end of Q2 2023. Of the 36 companies that have issued their third warning in the last 12 months, eight (22%) have delisted or are in the process of delisting, mostly through administration or distressed sales.

The tightening credit landscape is likely to pose challenges to the remaining 28 companies in the ‘three warning danger zone’ with upcoming debt maturities. EY analysis found that these businesses have a combined debt of £2.8bn due in 2024 and 2025, while companies that have issued two warnings have a combined debt of £7.8bn due over the same period.

EY-Parthenon’s report also found that earnings downgrades were spreading into the middle of the listed market. More than a quarter (29%) of profit warnings during Q2 came from companies with revenues between £200m-£1bn, marking the highest proportion of warnings issued by this mid-market group of companies in four years.

Jo Robinson, EY-Parthenon Partner and UK&I Turnaround and Restructuring Strategy Leader, comments: “The sustained rise in profit warnings over the last two years reflects the extraordinary mix of challenges faced by UK businesses over that timeframe. It’s now clear that the effects of these low-growth conditions are spreading to nearly all corners of the UK economy, and this quarter we’ve seen earnings pressure extend up the value chain into the mid-market.

“Rising interest rates have significantly changed credit conditions for companies that need to refinance, and businesses have started to feel the effect of a more expensive borrowing environment, especially in sectors where credit availability has been a key driver of activity. The number of businesses that had previously locked in low interest rates has postponed some of the challenges, but not indefinitely. We’ll likely see credit cost and availability play an increasingly significant role in restructuring activity as more businesses encounter a markedly different refinancing landscape.

“Insolvency activity typically peaks nine to twelve months after a profit warning peak. Conditions are likely to remain challenging and those businesses best placed to persevere will be those that can reshape their operations to withstand further shocks and capitalise on growth.”

Construction sector suffers following housing market slowdown

Companies within the FTSE Construction and Materials sector recorded six profit warnings during Q2 2023, representing 10% of Q2’s total profit warnings. This is the highest level of warnings from this sector since Q2 2020, with more than a quarter (28%) of FTSE Construction and Materials companies issuing a profit warning in the last 12 months.

Five of the six warnings issued by FTSE Construction and Materials companies in Q2 2023 cited a slowdown in house building as a key trigger.

Amanda Blackhall O’Sullivan, EY-Parthenon Partner and Creditor Advisory Leader, comments: “Most of this quarter’s warnings have been issued by a squeezed middle of subcontractors and suppliers, which have seen material cost and labour headwinds combine with a slowdown in the housing market prompted by rising interest rates.

“Construction’s biggest businesses have been largely protected from hardship so far, as they typically work across diverse portfolios that include projects within the still-buoyant infrastructure sector, with relatively low exposure to the UK housing market. However, if the sector’s slowdown continues then we may see this economic stress move further up the value chain.”

Retail pressures ease but sector remains vulnerable

The sectors with the most warnings in Q2 2023 were FTSE Industrial Support Services (seven), FTSE Construction and Materials (six), followed by FTSE Retailers (five) and FTSE Pharmaceuticals & Biotechnology (five).

Warnings from industrial FTSE sectors rose by 40% year-on-year as wavering business confidence has led to spending delays and cost cutting. Six of the seven profit warnings from the FTSE Industrial Support Services sector cited lower demand from business customers, including falling recruitment.

FTSE Retailers issued 10 warnings in the first half of 2023, representing a fall from the 16 warnings issued in the first half of 2022. However, more than a fifth of companies (six) remaining in the ‘three warning danger zone’ came from either FTSE Retailers or FTSE Personal Care, Drug and Grocery Store sectors, and these businesses may find themselves vulnerable if cost-of-living concerns continue to squeeze consumer incomes and spending.

365 Business Finance and Pollen Street Capital (“Pollen Street”) have successfully completed a 40% increase to Pollen Street’s senior secured credit facility, boosting 365 Business Finance’s funding capacity to support SMEs across the UK.

The London-based provider of revenue-based finance has already seen significant growth in demand, with 141% year-on-year increase in the amount funded to UK SMEs. 365 Business Finance’s proprietary technology platform and unique automatic collections process have enabled it to maintain market-leading credit performance and record levels of origination. The increased facility has also enabled the company to increase its maximum individual advance from £300k to £400k.

“We’ve seen incredible levels of growth in the past year, with thousands of businesses looking to our revenue-based funding solution to help their businesses thrive during this challenging period of economic uncertainty and high interest rates,” said Andrew Raphaely, 365 Business Finance Managing Director. “Our flexible repayments solution, which matches our customers’ cashflow, market-leading customer service and fully-automated collections technology have enabled us to become a leading provider of unsecured finance to the retail, hospitality and online sectors.

“We’re delighted to build on our long-standing relationship with Pollen Street. Our increased credit facility will enable us to more than double our levels of funding to UK SMEs over the next 12 months.”

Michael Katramados, Partner, Pollen Street, said, “We are delighted to build on our strong relationship with 365 which started in 2018, increasing our facility to support them as they grow. Through this facility our financing will continue to support SMEs across the UK, aligning with our commitment to generating a positive impact through the work that we do.”

365 Business Finance has grown significantly and is originating at its fastest pace ever while performance and cash collections remain strong. The business has seen headcount grow by 50% in the past 12 months and recently opened a brand-new office in Finchley Road.