Winter could be even colder…

The hospitality sector should be bracing itself for its busiest time of the year in the next four weeks. 

Every pub, restaurant, brasserie and bar should be examining their bookings to see if they can squeeze in one more Christmas party and they have enough staff to cover the full diaries they already have. 

Sadly it doesn’t look like everything is going to plan because a recent joint report underlines exactly how big the problems facing the hospitality industry are with more than a third of respondents saying they could become insolvent by early next year if they have a poor Christmas and new year period and bills continue to rise. 

The new report was commissioned by UKHospitality; the British Beer and Pub Association (BBPA); the British Institute of Innkeeping (BII) and Hospitality Ulster. 

It found that 35% of businesses say they’re facing higher energy costs and food price inflation and will either be operating at a loss or in the worst circumstances be unable to continue trading.

The trade bodies said their research revealed the “stark situation facing hospitality businesses, with many on the brink due to the cost of doing business crisis.

“The vulnerability of the sector due to soaring energy costs, crippling rises in the cost of goods and dampening consumer confidence is on full display in this survey and, if urgent action isn’t taken, it is looking incredibly likely that we will lose a significant chunk of Britain’s iconic hospitality sector in the coming weeks and months”.

While many restaurants did enjoy a decent unrestricted summer with no lockdowns or restrictions, the recovery has been somewhat hamstrung by a combination of labour shortages, wage inflation for those workers still available and shortages and inflation for foodstuffs. 

Barclaycard have already noticed that the sector is seeing a reduction in footfall as consumers wrangle with having less money to spend on going out. 

In their latest consumer survey, more than half of respondents said they planned to cut down on non-essential spending – which includes eating out/takeaways. 

Hospitality insolvencies are up 46%

In the third quarter of the year, company insolvencies in the restaurant industry rose by 46% alone. Between July and September, there were 158 restaurants entering an insolvency procedure compared to 108 in the three corresponding months to the end of June. 

This is before large energy bills start to land for customers and companies alike and while interest rates have hit a 14 year high and businesses are juggling repaying debts incurred during the pandemic including bounce back loans while no longer having the protections limiting creditor action to retrieve debts such as winding up petitions. 

Sacha Lord, an independent advisor to the government on the UK night time economy warned that the data signalled an impending collapse in the sector if action isn’t taken. 

He said: “The data we have received is just the tip of the iceberg and shows a very worrying trend which, we believe, will only get worse over the months to come.

“An increase of nearly 50% in insolvencies in three months shows the sector in an extremely worrying state and it is now entering a winter in freefall. 

“There is a severe lack of confidence among operators, particularly those running small independent businesses, and this has been exacerbated by the confusion over possible business support and ongoing U-turns.

“The implementation and subsequent reversal in the freeze on alcohol duty is just one example where planning has been made impossible, adding to the despondency and anxiety across the board.

“The stark truth is that hospitality businesses are paying more for ingredients, energy and day to day business needs than they were this time last year, and we are seeing venues shutting due to financial difficulties on a daily basis. 

“The sector urgently needs support through a reduction in VAT and through business rates relief, both measures that will undoubtedly offer operators a lifeline.”

Get in touch while you can make changes

While many other sectors will be coming under undue pressure in the upcoming winter, it’s hospitality that will be the public face of the crisis as people will immediately notice if their favourite pub or restaurant closes down. 

Even though we’re into December already, hospitality and other companies still have some time to make some effective changes immediately that can benefit them – but only if they get in touch first. 

We offer a free initial consultation for any director or business owner who arranges one

They’ll work with a dedicated expert advisor who will let them know what options they have and how they can implement them quickly and efficiently to help their business during these unprecedented trading times.