‘Relentless pressures’: More hospitality firms forced to shut even before Iran war
The rate of corporate collapse in hospitality surged in February in signs the sector was struggling to stay afloat even before the Iran war brought further cost pressures.
The number of accommodation and food service firms declaring insolvency jumped by 22 per cent to 270 in February, according to government data.
This acceleration of the crisis facing hospitality businesses came even before the Iran war energy cost surge and April tax rises which two thirds of bosses say will force them to cut jobs.
As many as 254 food and beverage service businesses were forced to shut in February, including 171 restaurants and food trucks, and 64 pubs.
More than 700 pubs have shut in each of the last three years, with the rate of closures in the sector having surged since 2022, when only 512 closed their doors.
Pub owners raged at Chancellor Rachel Reeves after changes made to business rates at the Budget – intended to make the tax fairer for hospitality and retail firms – ended up saddling thousands of landlords with soaring bills.
Iran war threatens energy bill surge
Reeves was eventually forced into offering a £300m emergency business rates relief package, but landlords have said rising energy costs due to the Iran war mean their woes are unlikely to ease.
The boss of the UK’s oldest brewer, Shepherd Neame, told CityAM the industry is “screaming for a reset” and warned his firm is bracing for higher energy bills.
Some of the industry’s bigger operators are insulated by long-term fixed-rate energy contracts, but the boss of JD Wetherspoon told CityAM he is having to “strain every sinew” to avoid rising the price of beer.
Trade body UKHospitality has said independent pubs – which may not benefit from fixed contracts – and those which are off-grid are vulnerable to “devastating” energy bill hikes.
Saxon Moseley, head of leisure and hospitality at audit firm RSM, said: “While bigger operators tend to be better insulated due to having stronger balance sheets and economies of scale to fall back on, it’s the smaller, independent businesses that are struggling the most.”
Hotels left out of business rates life raft
Hotels are also facing rising costs, with 10 having shut in February while 16 accommodation firms collapsed in total in the month.
Bosses at leading hotels and restaurants have hit out at the Treasury for excluding their sectors from the business rates life raft – which was offered only to pubs.
Gordon Thomson, restructuring partner at RSM, said: “Relatively weak sales in the hospitality industry along with relentless cost pressures have required some operators to explore restructuring options to optimise their trading position and to reduce their cost base.
“It’s encouraging to see businesses taking action rather than burying their heads in the sand, but this highlights just how challenging it is to operate in the current environment.”