Hospitality insolvencies rise 20% over past year
The latest company insolvency statistics reveal a 20% increase in accommodation and food service insolvencies over the year to May 2024, rising from 3,133 in the 12 months to May 2023 to 3,752 in the 12 months to May 2024. However, there was a 9% decrease in month-on-month insolvencies in May 2024.
Saxon Moseley, head of leisure and hospitality at RSM UK, commented on the challenging period for the leisure and hospitality sector: “Today’s insolvency figures highlight just how difficult the last 12 months have been for the leisure and hospitality sector. Businesses continue to struggle against a backdrop of increasing wage costs, stubborn food inflation and high interest rates.”
Moseley also highlighted the mixed implications of recent policy announcements. The King’s Speech offered some hope with proposed reforms to apprenticeships, a streamlined planning system for new sites and laws to improve safety at late-night venues.
However, anticipated changes to zero-hour contracts, employee rights and further minimum wage increases could further strain margins. The absence of business rates reform or VAT reductions in the announcements leaves many in the industry looking to the Autumn Budget for additional support to reduce insolvencies.
Government statistics indicate that most industries saw increases in company insolvency numbers in the 12 months to May 2024 compared to the previous year. The accommodation and food service sector experienced the largest rise, with a 20% increase. In contrast, Other service activities saw a 7% decrease in insolvencies.
Meanwhile, Kate Nicholls, chief executive of UKHospitality, emphasised the significance of new measures unveiled by the government but expressed disappointment over the lack of business rates reform in the King's Speech.
“With no mention of business rates in today’s King’s Speech, the autumn fiscal statement is now all the more important to drive the government’s plan for national renewal and to show clear progress on delivering its manifesto commitment to fix the broken business rates system. Particularly as businesses are facing an end to 75% rate relief next April if action isn’t taken,” Nicholls said.
The government has also promised “much-needed reform” of the Apprenticeship Levy, a long-standing priority for the hospitality industry. Nicholls explained that greater flexibility in fund expenditure through a new Growth and Skills Levy will enhance training opportunities and support the rollout of a skills pilot to help the unemployed enter the sector.
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