Today’s company insolvency statistics show accommodation and food services insolvencies were up 5% in the year to September 2024 (from 3,490 in the 12 months to September 2023, to 3,679 in the 12 months to September 2024. However, insolvencies in the sector saw another month-on-month decrease from 270 (August 2024) to 260 (September 2024).
Overall, after seasonal adjustment, the number of registered company insolvencies in England and Wales was 1,747 in October 2024, 10% lower than in September 2024 (1,950) and 24% lower than the same month in the previous year (2,293 in October 2023). However, the number of company insolvencies remained much higher than those seen both during the COVID-19 pandemic and between 2014 and 2019.
Saxon Moseley, partner and head of leisure and hospitality at leading audit, tax and consulting firm 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.
“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.”
Trevor Wood, Partner, Vedder Price said:
“It’s actually pretty remarkable that insolvencies have fallen. For the last few months, the Government has taken every possible opportunity to hammer home the grim economic reality. You’d expect this to prompt a reduction in consumer spending and with it a rise in insolvencies, but somehow this hasn’t happened. Even though they remain stubbornly high, I suspect the fall in insolvencies is largely down to the slow reduction in interest rates, which will have alleviated at least some of the pressure on businesses and consumers alike.
“We’ll probably see a further fall in insolvencies before the end of the year thanks to Black Friday and Christmas. The economic conditions at home will remain tricky, and the geopolitical picture is uncertain, so I strongly suspect the fall in insolvencies is a welcome, but brief blip.
“The restrictive planning system and the UK high street spiralling makes it difficult to see how things can improve for either construction or retail. If the Government fails to hit some more positive notes, and if interest rates don’t fall further, the new year will bring with it an increase in interest rates.
“We’ve stayed insolvencies this month, but UK plc hasn’t been granted a reprieve.”
