Rescue and recovery company Begbies Traynor's Red Flag Alert research found 2,754 companies out of 13,211 (21%) reported financial distress compared to 17% a year ago.
It also found closures in the second quarter of the year were up 53% compared to the same period in 2015, appearing to contradict the Campaign for Real Ale’s findings that pub closures have slowed to 21 a week.
Factors
Begbies Traynor, which monitors the financial health of UK companies, suggested the rise in financial problems is due to the introduction of the national living wage, unseasonable weather, England’s early exit from Euro 2016 and Brexit.
The company suggested the difference from figures reported by CAMRA could be due to Begbies Traynor only reporting Limited companies, so any sole traders would not be included. It also only has one record from each pub group, many of which own multiple sites.
Uncertainty
Julie Palmer, partner at Begbies Traynor, said: “The knock-on effect of England and Wales’s exits from Euro 2016 and the damage to consumer confidence in light of the current economic and political uncertainty, means the UK’s pubs and bars face serious challenges ahead that could result in more business closures or failures over the coming months.
“In addition, the longer term impact of the introduction of the national living wage remains to be seen but, given the sector’s model of tight margins and low-cost staff, many businesses are already struggling to cope with the increased costs.
“Given the current financial state of many of the UK’s pubs and bars, many could be forced to either cut staff to reduce costs or face falling into the red.
“While England going out of the Euros would have been more disappointing to this sector than most, Andy Murray’s recent win at Wimbledon, the upcoming Olympics and the possibility of an Indian summer, should give this sector a much-needed boost.”