Hospitality insolvencies dip in September in 'calm before the storm' 

Hospitality insolvencies saw a month-on-month fall in September, but financiers have warned it could be the calm before the storm.

 

September saw 260 insolvencies in the sector, according to audit, tax and consulting firm RSM UK, compared to 270 in August.

 

However, despite the decrease, total insolvencies across accommodation and food services businesses saw a 5% year-on-year increase, to 3,679, in the 12 months to September 2024.

 

Saxon Moseley, partner and head of leisure and hospitality at RSM UK, said: "While food and accommodation insolvencies fell for the third consecutive month, this may well be the calm before the storm following recent cost increases announced in the Budget and additional compliance changes under the Employment Rights Bill. The additional costs are set to put further pressure on operators’ already-stretched margins, meaning there’s likely to be more insolvencies to come. 

 

“The hospitality industry is already in the doldrums, with subdued consumer confidence and people continuing to prioritise saving over spending. In the short term, operators will be hoping to make the most of the crucial festive season and build up a war chest of cash reserves, but that’s unlikely to be enough to see them through the raft of additional costs from April next year.”

 

A number of budget measures are due to kick in from April and operators have been totting up the cost of changes to employer National Insurance Contributions (NICs) alongside increases in national minimum wage and a reduction in business rates support, with many warning the combination could be a death knell for some businesses.

 

Moseley, added: “We expect to see a number of operators struggle to make ends meet in the New Year, with resourcing and pricing levers already pulled and little scope for further cost cutting. Calls for the government to rethink its recently announced employment tax changes will grow louder as more businesses conclude their operations are no longer viable in the current trading environment.”  

 

Hospitality has seen a spate of closures in recent months as cost pressures continue to bite following the bruising years of the Covid-19 pandemic. These include Simon Wood’s Wood Manchester, Nick Nairn’s Nairn’s in Bridge of Allan, Stirling, as well as Liz Cottam’s Home and Michael O’Hare’s Psycho Sandbar, both in Leeds.

 

Earlier in the year other restaurants to shut their doors included Monica and David Galetti’s Mere and Michel Roux’s two-Michelin-starred Le Gavroche in London, as well as James Close’s two-Michelin-starred Raby Hunt in County Durham.