Pub closures hit highest quarterly figure in a decade
Some 223 pub businesses entered insolvency in Q2 2023, up from 200 in Q1, the data revealed. Furthermore, 729 pub businesses went bust over the last 12 months, representing an 80% increase on 2021/22 (405).
This comes as high energy, labour and wholesale food and drinks costs squeeze the hospitality sector.
Price Bailey insolvency and recovery team head Matt Howard said: “Pub closures are rising at a rate unheard of in more than a decade. We are seeing a perfect storm of high inflation and interest rates at a time when many pubs are on life support.”
“Aggressive interest rate hikes this year have really turned the screw just when it looked like the economy was stabilising. Many pub businesses have piled up barely manageable levels of debt over a testing few years and rate hikes are tipping an increasing number into the red.”
Price Bailey points out that recent policy decisions have also hit the pub industry hard. The Bank of England interest rate began the year at 3.5% but has been hiked over the past six months, finishing at 5% by the end of Q2.
Contributing factors
The Government’s £18bn energy support package for businesses also began to taper away at the end of Q1 meaning that energy costs for publicans have started to rise.
Other factors include the need to repay Covid support loans and rail strikes, which have meant that many city centre pubs have lost out on vital trade.
Howard also said there were a number of zombie businesses in the pub sector, which have been shuffling forward, sustained by low interest rates.
He continued: “As rates have risen banks have started to pressure them to make capital as well as interest repayments on loans. This has proved the final nail in the coffin for many pubs.
“Business failures in the pub trade are likely to continue to rise throughout the second half of the year.”
He added that operators were still restricting opening hours and scaling back the services they provided to customers during off-peak hours.
While focusing on the most profitable hours could provide a short-term boost to profitability, he said it could come at the cost of long-term consumer relationships.
Mixed bag
Price Bailey said that while many large pub chains and small independent pubs are continuing to close in swathes, new types of pubs are thriving.
JD Wetherspoon, the UK’s largest pub chain, recently announced plans to close and sell 39 pubs.
At the same time independent craft breweries are taking advantage of the craft beer boom to open their own pubs in large numbers. For instance, BrewDog recently opened London’s biggest pub at Waterloo station, and there has been an increase in theme pubs, such as the Boom Battle Bar chain, which combines food and drink with games.
Howard added: “Even though many of the large pub chains and independent pubs are struggling, innovative new market entrants, such as pubs owned by craft breweries, and theme pubs, such as the Boom Battle Bar chain, are successfully shaking up the industry.”
