11% of UK pubs at risk of imminent closure
According to the latest data from accountancy firm Price Bailey, of the 37,961 pubs and bars in the UK 7,445 (20%) pubs were technically insolvent.
In addition, 4,310 (11%) were found to have a commercial credit score in the Maximum Risk category when measured using the Delphi Risk method, an increase of 930 from 12 months ago, when 3,380 pubs were classed as both technically insolvent and in the Maximum risk category.
Price Bailey head of the insolvency and recovery team Matt Howard said: “These businesses will find it almost impossible to access extra funding unless the owners provide personal guarantees, which few are likely to do in the current climate.”
Based on analysis of credit risk scores and balance sheet information, the figures also revealed there were 378 pub insolvencies in H1 2024, the same number as H1 2023, equivalent to 2.1 pub businesses failing every day.
Rising overheads
Pub closures also surged to the highest total in more than a decade last year, with 769 pub businesses having entered insolvency in 2023, up from 518 in 2022, beating the previous decade-high total by 48%.
According to Price Bailey, a convergence of adverse factors has squeezed the hospitality sector, including high energy, labour and wholesale food and drink costs. At the same time the disposable income of pub-goers has struggled to keep pace with inflation in recent years.
Howard continued: “Pubs are still restricting opening hours due to staff shortages, rising overheads and declining footfall. Many are having to sacrifice long term customer relationships on the altar of profitability as they focus on the busiest hours.”
The accountancy specialists added while the Bank of England cut interest rates from 5.25% to 5% in August, other measures announced by the Government, including a sharp increase in the minimum wage expected in the Autumn Statement and proposals to ban smoking in pub gardens, were likely to “offset” any relief afforded by the reduction.
Remain in the red
“The inflation rate for pubs remains stubbornly above the core rate with little sign of relief. If the Government announces an inflation-busting hike to the minimum wage in the Autumn Statement, many pubs that are currently on life support are likely to flatline.
“Workers in the pub trade have been among the chief beneficiaries of rises to the National Living Wage, which has been hiked by over 40% in five years. Even when pubs see improved turnover wage costs mean many firms remain in the red for large parts of the trading week”, Howard added.
Though while some large chains and small independent pubs continue to close in “significant numbers”, new types of pubs are “thriving”, Price Bailey explained.
Howard said: “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, are successfully shaking up the industry.”
