Figures from the Insolvency Service revealed the sector was the industry with the third highest number of insolvencies in 2023 at 3,727.
Furthermore, insolvencies have risen fastest in the food service and accommodation sector in the past 12 months.
Overall, more than 25,000 companies across England and Wales went bust last year – a 14% rise in 2022 and the highest annual figure since 1993.
Significant jump
Audit, tax and consulting firm RSM UK consumer markets senior analyst Robyn Duffy said: “Despite positive sales numbers in 2023, with like-for-like sales up 5.8% on average, there was a significant jump in the number of insolvencies in the hospitality industry in the fourth quarter of 2023 and on an annual basis.
“Crippling costs will have been the last straw for some operators with energy costs still around twice as high as they were pre-Covid.
“Additionally in April, we will see the largest ever increase to the national living wage for those aged 21 and over (increasing £1.02 to £11.44) and a similarly sharp increase across other age groups.
“Without support from the Government to manage the escalating costs for these businesses in the form of VAT relief or otherwise, it’s likely the distress we have seen will continue until at least the second half of 2024."
Future hope
Duffy added: “The second half of the year brings greater hope of a further boost to demand with economic factors impacting consumer spending beginning to enter positive realms – interest rates should fall from summer, inflation is forecast to hit 2% in the second quarter and real wages will continue to grow.
“But until then, the sector looks set to see continued distress for now.”
Meanwhile, figures from the latest Hospitality Market Monitor showed 22,859 licensed firms closed in the past three years.
The research, which was from CGA by NIQ and AlixPartners, revealed 6,000 of those shut in 2023.
In addition, the number of new openings was in decline for the third consecutive year with just 11,743 during this timeframe.
