The hotel sector has been hit by the interest-rate swaps mis-selling scandal, according to Berg, a Manchester-based law firm providing corporate and commercial, dispute resolution, real estate, employment and family services.

Interest rate swap arrangements involve highly complicated financial products that were often mis-sold by banks to small and medium enterprises (SMEs), which they must continue to pay for the full term of the swaps despite changes in the economy.

"For businesses like these to suddenly be faced with huge costs because of financial products mis-sold to them can be crippling."

Berg is currently advising over 40 SMEs on mis-sold interest-rate swaps, of which around 15% are in the hotel and hospitality sector.

The law firm said that the seasonal nature of hotels coupled with limited working capital has affected them severely.

Unable to face huge monthly payments or high contract breakage fees, several hotels are finding themselves out of business.

Berg managing partner Alison Loveday said that although many types of businesses have been affected by interest-rate swaps, hotels and others in the hospitality sector have been badly hit.

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"For businesses like these to suddenly be faced with huge costs because of financial products mis-sold to them can be crippling. Many simply don’t have the working capital to pay the large interest payments and similarly cannot afford the penalties to break the agreements," Loveday added.

"Against that background, it is no surprise that some are going out of business. The guidance from us is seek professional advice immediately. We will investigate if there is a case for an interest-rate swap being mis-sold by a bank which if pursued could result in a significant damages claim and/or assist in opening up a dialogue with the bank concerned."