The latest official figures from the Office for National Statistics (ONS), released Tuesday 17 December, showed insolvencies in the accommodation and food services sector were down 24% in the year to October 2024, the lowest level for two years.
According to the data, there were 253 insolvencies in year to October 2024 compared to 332 the previous year, meaning there are 3,602 businesses remaining in the sector.
In addition, insolvencies in the industry saw a month-on-month decrease for the second time in a row, down from 261 in September this year.
RSM UK partner and head of leisure and hospitality Saxon Moseley said: “An early Christmas present for operators as insolvencies hit the lowest level in two years and continued a downward trend since the summer.
Looming cost increases
“With the festive trading period well underway, operators will be hoping to build up some reserves to help mitigate the impact of looming cost increases.”
The previous data from ONS revealed hospitality insolvencies jumped 5% year-on-year in September.
However, the sector saw the third highest number of insolvencies during the 12-months to October, after the construction and wholesale & retail industries, losing 15% of venues.
In addition, Moseley warned the hospitality sector was “braced” for further economic pressure following the autumn Budget, which could drive a “further wave” of distress deals and consolidation next year.
He continued: “The industry is bracing for a wave of post-budget headwinds with employment costs increasing and additional compliance changes under the Employment Rights Bill.
“For vulnerable businesses already struggling to make ends meet, this could well be a step too far and we expect to see an uptick in insolvencies across the industry next year as a result.
Wider challenges
“This backdrop will create consolidation opportunities for operators looking to strengthen market position through strategic acquisitions and bring efficiencies to respond to the budget measures.”
The data also revealed there were 141 self-employed bankruptcies (also referred to as ‘trader bankruptcies’) during the 12-month period, accounting for 10% of all trader bankruptcies across UK business.
Night Time Economy Adviser for Greater Manchester, Sacha Lord, said the rate of self-employed bankruptcies within the hospitality sector “underscored the wider challenges” faced by the industry.
Lord also warned the increase to Employer National Insurance contributions and reduced business rates relief would be a “double hit” for the sector next year.
He continued: “Businesses are in hazardous financial position, and this will only continue to increase as April approaches.
“Unsurprisingly, the months sandwiching the new tax year saw the highest numbers of bankruptcies, as business owners try to navigate imminent tax changes.
“I’m sadly confident we’ll see similar, but higher figures this March to May as changes in National Insurance and business rates cause nationwide distress and significant increases in outgoings.”
