Hospitality insolvencies jump 20% after tough year of trading

The number of hospitality businesses entering insolvency has risen 20% in the past year during a difficult period for the industry.

Some 3,752 food and accommodation companies shut down in the year to May 2024, up from 3,133 in the previous 12 months, according to government data.

However, in a sign the situation may be improving, the number of hospitality insolvencies dropped 9% between April and May this year.

Saxon Moseley, head of leisure and hospitality at audit, tax and consulting firm RSM UK, said: the figures showed "just how difficult the last 12 months have been for the leisure and hospitality sector”.

He added: “Businesses continue to struggle against a backdrop of increasing wage costs, stubborn food inflation and high interest rates.

“While consumer confidence is slowing improving, the unseasonably cold and wet weather has had a devastating impact on trading in the first half of 2024.

“Sporting events such as the Euros will have helped the industry, but sadly it hasn’t so far been the bumper summer that operators were hoping for. For some, it won’t have been enough to keep them afloat.”

This week’s King’s Speech has received a mixed reaction from the hospitality industry, with the new government announcing plans to reform apprenticeships and the planning system.

However, Moseley warned proposed changes to zero-hour contracts, employee rights and further minimum wage increases would likely put further pressure on margins.

“With no mention of business rates reform or VAT reductions for the industry, many will be looking for support in the Autumn Budget to slow the rate of insolvencies in the sector,” Moseley added.

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