Insolvencies surge in the hospitality sector

The hospitality sector is buckling from a combination of a slowdown in consumer spending and increased labour and energy costs, which is leading to a surge in insolvencies. 

Cafes, restaurants and pubs are continuing to battle with staff shortages, while bills for food and energy continue to rise as we remain faced with double-digit inflation. 

As of November 2022, insolvencies in the restaurant sector had risen 59%, with approximately 1,600 companies falling into financial distress. 453 of those failures happened within the preceding three months, up from 395 in the previous quarter. 

It’s perhaps of little surprise, then, that food and drink service businesses were more likely than any others to cut trading as a result, research by the Office of National Statistics has confirmed.

Just over a fifth of these businesses have cut their trading hours, although some have continued to operate for the same number of days.

All of this accords with what we are seeing in the local market, as the ongoing cost pressures in particular, continue to force businesses into making difficult decisions.

One such example is Paschoe House, a prominent Devon boutique hotel with a fine-dining restaurant, over which we were appointed Liquidators on the 16 March 2023.

The pandemic, the subsequent reduction in footfall and the surge in running costs (electricity costs have trebled, for instance) have meant that the business is simply no longer sustainable. 

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