The UK’s hospitality sector—encompassing hotels, restaurants, and leisure facilities—remains highly susceptible to economic downturns and shifts in consumer behaviour. Although the industry saw some recovery in 2023, it has faced significant challenges in the first half of this year. Recent insolvency data for England and Wales reveals that, over the past 12 months, the hospitality sector has experienced the highest increase in company insolvencies compared to other industries, accounting for 16% of all recorded insolvencies during this period.

Sector Overview

In the current recessionary climate, the hospitality sector is struggling with high operational costs, further intensified by restricted consumer spending within a fiercely competitive and unforgiving economic environment. Energy prices remain elevated compared to pre-2022 levels, and although stronger demand driven by real wage growth has provided some relief this year, poor spring and summer weather has dampened these gains. Consequently, many businesses in the sector continue to face significant challenges.

Regionally, Greater London has experienced the highest number of administrations, followed by the North West and Yorkshire & The Humber. HMRC’s increased enforcement actions are pushing businesses to consider administration as an alternative to compulsory liquidation. A decade of hotel expansion in the South and South East of England is now being reversed, with many hotels struggling with unsustainable debt, losses, and staffing issues opting for permanent closure.

Government support and creditor forbearance during the pandemic temporarily sustained many businesses, but ongoing weak trading and rising employee costs are exacerbating financial difficulties. In Scotland, approximately one in five recent insolvencies has been within the hospitality and leisure sector. Expert analysis indicates that the sector has accrued around £2.5 billion in rent arrears due to the pandemic, in addition to substantial borrowing through various COVID-19 loan schemes. The latest Market Recovery Monitor survey reveals that nearly 10% of UK restaurants have closed since the pandemic began.

Although staycations have become more popular due to travel restrictions, the sector now faces a unique set of challenges likely to inflict long-term strategic damage, particularly in the South and South East of England.

Insider tip: In the last three days alone, our platform has tracked more than 20 insolvent hospitality businesses. This underscores the importance for hospitality entrepreneurs and investors to closely monitor market conditions and explore strategic opportunities, such as acquiring distressed assets within the industry.

Hospitality News: Pub Insolvencies on a Steep Rise 

Insolvencies in the pub and bar sector have surged by nearly 30% since last year, reflecting the ongoing strain of the cost-of-living crisis on sales. The increase in insolvencies—from 602 to 784 for the year ending April 30, 2024—has been linked to rising drink prices and the trend of people cutting back on discretionary spending.

Expert analysis from UHY Hacker noted that higher alcohol prices and economic pressures are leading more consumers to drink at home rather than frequent pubs and bars. The firm also pointed to a growing trend of abstention among younger demographics.

The shift away from pub-going and alcohol consumption among younger people poses long-term concerns for the industry. This will also be important for the new Labour government to consider while reforming the current rate system to support high street businesses.

There is a small silver lining with the recent improvements in weather and England’s performance in Euro 2024 that have provided a temporary lift. The last week has been better for pub sales due to the combination of warm weather and the football tournament.

With England in the finals, pubs and bars across saw an increase in footfall and revenue over the weekend. However, while the Euros could lead to a strong summer for the sector, this improvement may be short-lived and not address the underlying issues that have led to higher insolvency rates within the sector. 

Hospitality News: Newark Golf Club acquired by Stellar Asset Management

A historic 123-year-old golf club in Nottinghamshire has avoided insolvency through its acquisition by Stellar Asset Management, an inheritance tax and estate planning specialist. This acquisition not only preserves the club’s future but also ensures that its members will receive a significant dividend.

Newark Golf Club has become the latest addition to Stellar Asset Management’s portfolio, marking at least the fourth golf club acquisition by the firm in recent years. The company’s previous acquisitions include Bramshaw Golf Club in Hampshire (2021), Paultons Golf Centre in Hampshire (2019), and Murrayshall Country House Hotel and Golf Club in Perthshire (2016). The purchase of Newark Golf Club has saved 20 jobs and secured the club’s long-term viability.

Earlier this year, the club’s directors recognised that its financial resources were insufficient to fund necessary updates to the 18-hole course and clubhouse, placing it at risk of insolvency. Their proactive approach to addressing the financial shortfall enabled a successful resolution without the need for insolvency proceedings.

Begbies Traynor emphasised the importance of the directors’ timely action. The swift identification of financial issues allowed for the club’s continued operation while seeking a solution that satisfied the members’ needs. The sale not only ensured the club’s future under a capable new owner but also enabled a unique distribution of funds, providing a dividend to the club’s 400-plus members after creditors are paid.

This case illustrates how business owners can significantly improve their chances of recovery by seeking timely and appropriate financial assistance. The coming months are expected to be challenging, and adapting to the continually shifting circumstances will be crucial for survival in this tough economic climate.