Hospitality accounts for 12% of UK administrations

Of all administrations filed in the UK in 2023, more than one-tenth came from the hospitality sector, a report from law firm Shakespeare Martineau revealed.

The report stated that 1,641 businesses in the UK filed for administration last year with 190 (12%) of those from hospitality venues – a 22% increase on 2022’s figure, and 91% on 2021.

Hospitality was the third-highest sector for administrations, after retail (239 businesses) and construction (200 businesses).

The data was taken from The Gazette, the UK’s official public record.

Andy Taylor, partner and head of restructuring at Shakespeare Martineau, said: “A shift in consumer buying habits, exemplified by a challenging January for the hospitality sector, adds to the narrative of subdued spending.”

Taylor said the increase in administrations “underscored” the current challenges hospitality businesses are facing.

The hospitality industry in the UK – bars, restaurants and pubs – has been feeling the pressure in the past few years, particularly in face of the government’s double-digit duty hike, which has been frozen for a year until 1 August 2024.

Furthermore, spiralling effects from the cost-of-living crisis and the Covid-19 pandemic, which have deterred many people from going out and spending money in these venues, has made a big dent on the sector’s ability to operate successfully, especially in regards to small businesses.

Taylor noted that the high interest rates seen in 2023  put financial strain on businesses with models that were doing well in an environment where interest rates were below 2%. These businesses will begin to run out of cash if the pressure doesn’t subside.

He added: “Moreover, the HMRC continues to be more active, with threatened enforcement pushing businesses towards considering their options, and many opting for administration as an alternative to being wound up on a compulsory basis.”

In addition, Taylor said that with predictions of the rate of inflation continuing its downward trajectory in 2024, “one might anticipate something like three interest rate cuts in 2024, which will hopefully stimulate growth.

“However, the economic landscape remains unpredictable, and our advice remains consistent – seeking professional advice early can open up more options for struggling businesses.”

In 2023, Scotland lost 76 pubs and bars, a record number, while Britain’s licensed venues dropped below 100,000 for the first time since 2023.

The UK’s largest nightlife operator, Rekom, also called in administrators for some of its venues as the sector continues to struggle.