Sacha Lord, the Night Time Economy Adviser for Greater Manchester, has issued a stark warning about the perilous state of the hospitality sector as new data reveals a surge in insolvencies.
Official figures from the Insolvency Service show hospitality businesses were the third highest sector for insolvencies in the year to October 2024, with 63.4 per cent of those bankruptcies occurring in restaurants and mobile food outlets.
Data for the number of self-employed bankruptcies (also referred to as ‘trader bankruptcies’) showed 141 bankruptcies in the sector, accounting for 10 per cent of all trader bankruptcies across UK business. The figures are up 11 per cent, from 127 on the previous 12 months.
Overall, the official data showed that the total number of registered company insolvencies in England and Wales totalled 1,966 in November, with construction and wholesale and retail trade reporting the highest number per sector.
The alarming trend is set to worsen as businesses face a “double hit” from increased employer National Insurance contributions and reduced business rates relief, both taking effect in April.
As announced in October’s Budget, businesses will see planned increases to the rate of employer national insurance, combined with a reduction in the business rates relief given to hospitality from 75 per cent to 40 per cent, both of which will take effect from April 2025.
“The rate of self-employed bankruptcies within the hospitality sector further underscores the wider challenges facing the industry. Businesses are in hazardous financial positions, and this will only continue to increase as April approaches,” warns Sacha Lord.
“Unsurprisingly, the months sandwiching the new tax year saw the highest numbers of bankruptcies, as business owners try to navigate imminent tax changes. I’m sadly confident we’ll see similar, but higher figures this March to May as changes in national insurance and business rates cause nationwide distress and significant increases in outgoings.”
Flagging a difficult year ahead, he warns that the sector, buoyed by the temporary boost from events like the Euros 2024, is now grappling with reduced consumer spending due to the cost of living crisis and a lack of similar large-scale events in 2025 and is urging policymakers to take immediate action to mitigate the looming crisis.
“The hospitality sector is a vital contributor to the UK economy – we are the third largest employer, and provide significant support to communities, both rural and urban,” he says. “Without urgent intervention, we risk losing countless businesses and livelihoods.”
BBC Masterchef winner, Simon Wood, owner of WOOD restaurant which fell into insolvency last month, also said, “After seven years of hard work building our restaurant, we were forced to close our doors last month. The rising costs of everything – from ingredients to energy bills – simply became unsustainable and this was ahead of the planned cut to business rates relief.
“Our restaurant was a high-profile, award-winning venue and if we were struggling, then it is not unprecedented to think that others will also be under extreme financial pressure. I’m gutted to say it, but the changes to the tax relief from April will be the final nail in the coffin for many like me.”
