Sector 'in the doldrums' as insolvencies rise 5%
The latest Government figures showed company insolvencies in the accommodation and food services industry were up 5% in the year to September 2024, rising from 3,490 in the 12 months to September 2023, to 3,679.
However, the numbers saw a month-on-month decrease, from 270 in August this year to 260.
Responding to the data, RSM UK partner and head of leisure & hospitality Saxon Moseley warned the slight drop could represent the “calm before the storm” as the cost increases announced in the recent Budget come into force.
Moseley said: “The additional costs are set to put further pressure on operators’ already-stretched margins, meaning there’s likely to be more insolvencies to come.
In the doldrums
“The hospitality industry is already in the doldrums, with subdued consumer confidence and people continuing to prioritise saving overspending.”
Chancellor Rachel Reeves announced a rise in Employer National Insurance Contributions and the National Living Wage as well as a reduction in business rates relief as part of the fiscal address last month.
The Government also introduced the Employment Rights Bill in October, which could have “major ramifications” for pubs, including the abolishment of zero hours contracts.
“In the short term, operators will be hoping to make the most of the crucial festive season and build up a war chest of cash reserves, but that’s unlikely to be enough to see them through the raft of additional costs from April next year.
No longer viable
“We expect to see a number of operators struggle to make ends meet in the New Year, with resourcing and pricing levers already pulled and little scope for further cost cutting”, Moseley continued.
This comes as research from the British Institute of Innkeeping (BII) last week revealed 25% of independent pubs faced closure following the Budget.
In addition, earlier this week, trade body UKHospitality (UKH) urged the Government to rethink the measures, estimating it could cost the sector £3.4bn in additional costs.
Moseley added: “Calls for the Government to rethink its recently announced employment tax changes will grow louder as more businesses conclude their operations are no longer viable in the current trading environment.”
