Hospitality loses 2,200 sites in three months as business cost challenges mount

Britain’s licensed hospitality sector saw a net decline of one closure every hour in the third quarter of 2022, the latest Hospitality Market Monitor from CGA and AlixPartners reveals.

It showed there were just under 104,000 licensed pubs, bars restaurants, cafes and hotels across the country at the end of September 2022—a net drop of 2,230 since June, which represents an average of just over 24 closures a day, or more than 150 per week.

This latest decline means there are 11,426 fewer licensed sites than in March 2020.

Hospitality initially built back from Covid, with the number of sites in June 2022 virtually the same as 12 months earlier. The closures over the last quarter follow a sharp rise in prices in energy, food and labour, and this trend looked likely to continue over the rest of 2022 without further government support, said the report.

While the number of managed sites was 3% below pre-Covid levels it increased by 179 sites in the last three months, but the independent sector contracted by 2.6%, a loss of 1,751 sites, reflecting the greater resources and buying power of larger businesses.

In contrast to the managed-independent divide, the trend of steady closures over the last quarter has been consistent across different locations. High street, suburban and rural locations all recorded the same net decline of 2.1% in licensed premises between June and September.

By region, quarter-on-quarter declines varied only slightly, from a low of 1.6% in the south and south-east to a high of 2.9% in Scotland.

The report also highlighted an ongoing contraction in the nightclub sector. The number of nightclubs in Britain fell by 5.6% in the last three months alone, and the sector has lost 309 sites, around a quarter of its total, since March 2020.

Karl Chessell, CGA’s business unit director for hospitality operators and food, EMEA, said: “These numbers show how hospitality’s steady recovery from COVID is now under severe threat from rising costs for businesses and consumers alike.

"The resilience and confidence of managed groups and their investors is impressive, and people’s appetite for eating and drinking out is undimmed.

"However, thousands of smaller businesses are now on a knife-edge and in need of financial support. Relief on energy bills has been welcome but sustained backing and clarity of policy is needed if hospitality is to power the economic growth that the government is chasing.”

Graeme Smith, managing director at AlixPartners said: “This contraction is sharp and graphically illustrates the impact significant cost headwinds are having upon the UK bar and restaurant market. Given that this decline is already happening before an expected slowdown in consumer spending, it is reasonable to conclude that without increased support from government the closure rate will in all likelihood accelerate.

“This volatility will also inevitably trigger market activity as companies are forced to restructure and merge in order to find cost savings, and additionally, as those that can – with the strength of balance sheet and financial firepower – acquire other groups.”

UKHospitality chief executive Kate Nicholls said: “It is truly saddening to see this scale of losses over the last quarter. It’s not just the sites that the industry loses but the fantastic people involved and the huge value they add to the cultural and social fabric of a local community… UKHospitality forecast this summer that we could lose 10% of the industry if adequate support was not offered and it would appear that prediction is bearing true."