The latest Hospitality Market Monitor from CGA and AlixPartners found at the end of last month (September), there were just under 104,000 licensed venues.
This was a net drop of 2,230 since June, representing an average of just over 24 closures a day, equating to more than 150 week.
The data showed the decline leaves the licensed sector with 9.9% (11,426) fewer sites since March two years ago.
These figures come after a year of relative stability, according to the report, as the sector fought back from Covid with the number of sites in June 2022 almost the same as 12 months prior.
Closures over the recent period follow rocketing energy, food and labour costs and is likely to continue across the rest of the year without Government intervention.
Furthermore, the report found a sharp contrast between the fortunes of managed hospitality groups and independent operators.
While the number of managed sites had contracted by 3% against pre-Covid levels, it increased by 0.9% (179 sites up) in the past three months. For the independent businesses, the segment reduced by 2.6% (down 1,751 sites).
The data also analysed closures in different locations and showed high street, suburban and rural locations all recorded the same net decline of 2.1% in licensed premises between June to September.
Data breakdown
When it come to regions, there was a slight quarter by quarter decrease from a low of 1.6% in the south and south east to a high of 2.9% in Scotland.
In addition, the research also looked at nightclubs and found this segment of the market had seen a drop of 5.6% in the past three months alone. It now has about a quarter fewer sites (309) than it did prior to the pandemic in March 2020.
CGA business unit director for hospitality operators and food EMEA Karl Chessell said: “These numbers show how hospitality’s steady recovery from Covid is now under severe threat from rising costs for businesses and consumers alike.
“The resilience and confidence of managed groups and their investors is impressive and people’s appetite for eating and drinking out is undimmed.
“However, thousands of smaller businesses are now on a knife edge and in need of financial support.
“Relief on energy bills has been welcome but sustained backing and clarity of policy is needed if hospitality is to power the economic growth the Government is chasing.”
The contraction is sharp and graphically highlights the impact cost headwinds are having on the UK bar and restaurant industry, according to AlixPartners Graeme Smith.
He added: “Given this decline is already happening before an expected slowdown in consumer spending, it is reasonable to conclude without increased support from [the] Government, the closure rate will in all likelihood, accelerate.
“This volatility will also inevitably trigger market activity as companies are forced to restricted and merge in order to find cost savings and additionally, as those that can – with the strength of balance sheet and financial firepower – acquire other groups.”
Scale of losses
The scale of losses during the quarter was described as “truly saddening” by UKHospitality chief executive Kate Nicholls.
She said: “It’s not just the sites this industry loses but the fantastic people involved and the huge value they add to the cultural and social fabric of a local community.”
Nicholls went on to say it was no longer a shock to see the high number of losses and it had become a common occurrence as the sector battles a myriad of issues including rocketing energy costs, recruitment challenges and a cost-of-living crisis.
The trade body boss added: “UKHospitality forecast this summer that we could lose 10% of the industry if adequate support was not offered and it would appear that prediction is bearing true.
“Prior to the pandemic, hospitality was the only sector due to generate real term growth and before the energy crisis hit, was forecast to grow 3%.
“It’s clear the economy needs hospitality to be firing on all cylinders and while the Government’s energy support package was very welcome, there now needs to be considered and urgent action to ensure businesses can survive. This should include business rates reform and lowering the rate of VAT.
“There is no time to waste – once these businesses are gone, they are gone for good. This scale of losses cannot continue – it must be avoided at all costs.”
