Guest blog: When seasonal businesses face insolvency

08 September 2025

By Peter Hall of Campbell Crossley & Davis.

Seasonal businesses often face a cycle of high earnings in peak months followed by a quieter period when income drops. While the busy season can bring healthy sales, the off-season can create serious cash flow problems. If these problems are not managed well, they can lead to seasonal business insolvency. This blog explains why seasonal businesses are at greater risk, what warning signs to look for, and how to prepare so you can survive and grow in the long run.

What is Seasonal Business Insolvency

Seasonal business insolvency happens when a business that relies on a short trading season cannot pay its bills during quieter months. Industries such as hospitality, tourism, leisure, agriculture and retail are often affected. Even when sales are strong for part of the year, fixed costs like rent, wages and utilities continue all year. If income in the peak months falls short, the business may struggle in the months that follow.

The Current Picture

Data from the Insolvency Service in August 2025 shows that company insolvencies have been rising in recent years, with the number of registered insolvencies in England and Wales being 2,081. Creditors’ voluntary liquidations (CVLs) make up most cases (1,583), but there has also been an increase in administrations (147). Hospitality and tourism businesses are showing above-average levels of financial stress.

Figures are seasonally adjusted so trends can be compared fairly. For seasonal businesses, this is important because short term peaks can hide longer term issues.

Why Seasonal Businesses Struggle

Relying heavily on one period of trading means there is little room to recover if something goes wrong. Bad weather, higher costs, changes in consumer habits or problems with suppliers can quickly create pressure. For businesses already close to their financial limits, even a small drop in income can lead to trouble.

Warning Signs to Act On

There are common signs that a seasonal business might be heading towards insolvency:

• Relying more on overdrafts or short-term borrowing to cover basic bills
• Delaying supplier or tax payments
• Cutting back on staff or maintenance even before the quiet season starts
• Falling profit margins despite steady sales

For more details on spotting these issues early, the British Chambers of Commerce has useful resources.

Managing Cash Flow

A clear cash flow forecast is essential. This should track income and costs over a full year, highlighting when cash reserves are likely to be low. Established businesses can use past sales data, while newer ones can look at industry averages and competitor information.

Where possible, arrange for large expenses to fall in busier months. This might include rent, stock purchases or planned maintenance. The aim is to avoid running out of funds during quiet periods while also having enough to prepare for the next busy season.

Flexible Restructuring

If cash flow problems become serious, restructuring may be an option to explore. One possible route is a Company Voluntary Arrangement (CVA), which allows a business to reach an agreement with its creditors to pay back what it owes over a set period.

Because CVAs are designed around the individual circumstances of a business, they can sometimes include flexible repayment terms, such as recognising seasonal fluctuations in income, provided creditors agree. In some cases, CVAs may also involve selling certain assets as part of the plan to repay creditors.

Speaking to a licensed insolvency practitioner as early as possible keeps more options open. Waiting too long often limits the solutions available.

Finding Extra Income

Adding income streams can reduce reliance on one season. Examples include hosting events in the off-season, selling gift vouchers, hiring out space or offering services suited to quieter months. The key is to avoid large extra costs.

The Federation of Small Businesses has case studies on how companies have achieved this without overstretching resources.

Staying Visible All Year

Stopping marketing during quiet months can harm a business. It makes it harder to get early bookings and sales when the next busy period comes around. Keeping in touch with customers through social media, email, and local advertising helps maintain interest.

The off-season is also a good time to update websites, refresh branding and plan promotions.

Industry-Specific Challenges

Different sectors face different problems:

• Hospitality: Rising energy, food and wage costs make it hard to protect profit margins.
• Travel and tourism: Regulations such as ATOL and ABTA membership must be maintained even in low seasons.
• Retail: Overstocking before a quiet period ties up money, while understocking in peak months can mean lost sales.

Acting Early Matters

The most important factor in surviving seasonal business insolvency is timing. Acting when problems are still manageable gives more options. An insolvency practitioner can help assess whether informal talks with creditors, voluntary arrangements or other steps are the best route forward.

R3 offers impartial guidance for company directors on recognising early warning signs and taking action before a situation becomes critical. Using resources like this can help seasonal businesses plan a more secure future.