Lowcosttravelgroup goes bust as Brexit turbulence starts to bite
Lowcosttravelgroup Ltd. has gone bust after the pound sterling nosedived following the 23rd June referendum in which the British population voted for Brexit – Britain exiting the European Union. The pound was at $1.50 per dollar one day before the vote, crashed to $1.30 within 24 hours of the referendum result, slid further to $1.28, and now stands at $1.32.
The pound is 12% lower today than it was just before the 23rd June referendum. This means that holidays abroad have become considerably more expensive. A holiday that costs $1,500 used to cost £1,000 on June 22. For that same holiday, you would have to pay £1,136 now.
For many people who have to pay in pounds, the latest increase in the price of their holiday abroad means they have had to cancel, which is bad news for tour operators, travel agencies and airlines.
Is Lowcosttravelgroup Ltd. the first of many victims to collapse as a result of the Brexit referendum vote?
400 Lowcosttravelgroup workers lose their jobs
It was more than Lowcosttravelgroup Ltd. could take – that is why the company, which has more than 400 workers, has gone into administration.
Smith & Williamson and CMB Partners UK Ltd, restructuring and recovery specialists, are joint administrators to Lowcosttravelgroup Ltd. and other firms within its group. The administrators are being advised by the international law firm, Nabarro LLP.
Unless the pound recovers, this is likely to be the first of many travel companies that go bust.
Lowcosttravelgroup Ltd. has the following message on its homepage:
“We deeply regret to announce that the lowcosttravelgroup (“LCTG”) ceased to trade on 15 July 2016, following exhaustive attempts by the group’s directors to rescue the group, which were hampered by the recent and ongoing turbulent financial environment.”
As soon as the result of the referendum on 23rd June was announced, the pound fell dramatically. It has not managed to recover. Analysts believe it will probably decline further.
Finbarr O’Connell, who works at Smith & Williamson, said:
“The group experienced significant market headwinds in the run up to the EU referendum as holidaymakers delayed decisions.”
“This was compounded by the Leave vote itself and the subsequent fall in value of the pound. Regrettably, in these extraordinary conditions, the directors had no option but to place Lowcosttravelgroup Ltd into administration.”
“Whilst we have not been appointed over the foreign subsidiaries which deal with the group’s customers we are aware that the directors of those companies are making all efforts to put useful and relevant information on the group website to assist customers to understand their individual positions.”
Lowcosttravelgroup Ltd., which principally sold holidays through Lowcostholidays and hotel accommodation through Lowcostbeds, operated a travel agency business from its headquarters at Gatwick airport in England and offices in Poland, Switzerland and Spain.
137,000 Lowcosttravelgroup customers affected
The company’s collapse will affect several thousand customers who bought holidays or flights. A significant number of customers are currently on holiday in resorts abroad, while others have not travelled yet.
If you are one of the 27,000 customers currently at a resort, Lowcosttravelgroup says your flight has been paid for and you will be able to fly home with your existing ticket when your holiday is over.
The following companies are part of the group ‘Lowcosttravelgroup Ltd.’
Approximately 110,000 customers have not travelled as yet, but have booked flights and holidays through the group. According to the administrators, a percentage of customers who have not yet travelled will have problems because their flights have not been paid for – the same applies to hotel accommodation.
Competition and Brexit referendum
The company’s collapse occurred because of increased competition in the industry plus the recent Brexit vote in the referendum, the directors explained.
According to Smith & Williamson, the group ceased trading on 15th July 2016, after its directors made exhaustive attempts to rescue the company, which it says had been hampered by the recent and ongoing turbulent financial environment.
— Majorca Daily (@MajorcaDaily) 15 July 2016
The administrators said a range of factors contributed to the group’s downfall, including:
– Uncertainty leading up to the referendum, which caused some potential customers to postpone holiday decisions.
– A dearer Euro since the outcome of the vote has discouraged many Britons from booking holidays. Sixty percent of the group’s customers are British.
– The terrorist attacks over the last couple of years have made some destinations much less attractive for travel to, including Paris, Orlando, Tunisia, Turkey, Egypt, and more recently Nice.
Mr. O’Connell added:
“Lane Bednash and I, together with the director of the Spanish travel agency subsidiary, are planning to meet with the appropriate Spanish regulators and authorities to investigate what compensation may be available to customers who have lost money due to this collapse.”
The group’s subsidiaries in Switzerland and Spain, where the travel agency and hotel booking businesses were run, have also ceased trading. These companies will in due course be placed into formal insolvency processes. Technically, a company whose total assets are worth less than its total liabilities is insolvent.
In the last year, the turnover of Lowcosttravelgroup Ltd. was approximately £500 million.
Most of the staff have been made redundant – some have been kept on to help the administrators in the potential sale of any parts of the group. Redundancy occurs when a job no longer exists – if you are fired and somebody replaces you in that position, it is not redundancy.
Below are the redundancy numbers:
Smith & Williamson wrote:
“Any customers who are currently on a Lowcostholiday, those who have booked a Lowcostholiday, and other creditors should visit the Lowcostholiday website atwww.lowcostholidays.com for further information about their position, including details of how to submit their claims in writing.”
“These claims will be dealt with in due course. Because of the volume involved, it will take time – potentially some weeks – for emails from customers and other creditors to be dealt with.”
“The group’s directors greatly regret this position, having tried all means available to them to rescue the situation.”
Any company, organisation or individual interested in acquiring any part of the business should contact Paul Stagg and Martyn Frazer at [email protected].
If you are a customer or creditor, you should go to www.lowcosttravelgroup.com and make your claim as directed.
Manchester Evening News quoted Jo Plant, 33, from Reddish in Stockport, who said she felt devastated when she found out her £1,400 four-night-stay in New York was lost. Her mother Edna, who had always dreamed of visiting the city that never sleeps, was shocked when her daughter broke the news.
Ms. Plant said:
“I have heard nothing from the company. I only found out about it on Twitter last night. When you go on the company’s home page it just says it has ceased trading.”
“I was devastated. The site suggests that your flights will be okay but your accommodation won’t be. However I checked with both airlines and neither of the flights have been paid for.”
“My mum had been really looking forward to it. She has always wanted to go to New York. Unfortunately I paid for it on my debit card so I definitely won’t get the money back.”
Video – Lowcostholidays ruined by holiday plans
In this video, a Lowcostholidays (part of Lowcosttravelgroup. Ltd) customer talks about how she felt when the company went into administration.