Pub Closures Surge Following April’s NI And NMW Rises

Pubs are closing at their fastest rate since last summer following April’s tax raid, according to new figures.

The number of pubs that declared insolvency jumped to 67 in April, the highest number since last July when 75 pubs went bust, according to accountancy firm Price Bailey.

The research found that 21 per cent of the 8,156 operating pubs have negative net assets on their balance sheets, which deems them technically insolvent.

It said these pubs are ‘vulnerable to going bust (cash flow insolvent), which occurs when businesses are unable to make payments to suppliers or lenders.’

Matt Howard, head of the insolvency and recovery team at Price Bailey said:
“The early signs are that the tax and minimum wage hikes which took effect in April are already tipping some struggling pubs over the edge.

“It was widely believed that pub businesses would initially find ways to absorb the additional payroll costs and that the full impact would only be felt much later in the year. That the impact has been so immediate shows that many pubs had already exhausted their financial buffers.

“April’s sharp rise in inflation, driven in part by rising energy costs, is adding to the misery of many publicans. One in five pubs are technically insolvent, and while it is possible to keep trading and salvage the situation, being hit with sharp payroll and energy price rises will prove too much for many of them.”

According to the British Beer and Pub Association (BBPA) April’s tax increases and the rise in the Minimum Wage have cost each UK pub about £14,000 on average.

The impact of rises in National Insurance contributions, the National Minimum Wage, business rates for some operators, plus newly introduced packaging taxes have wiped out the equivalent of 12 days of pubs’ turnover, the BBPA said.

Emma McClarkin, boss of the trade body, said the hit was “indefensible” and called for immediate action to help support the future of the sector.

Earlier this month a survey by leading hospitality organisations revealed that up to one third of businesses in the sector were running at a loss.

In a joint statement, the trade bodies said:
“The Government seems to be setting itself up to miss its own targets with these most recent cost hikes for the hospitality sector.

“Hospitality is vital to the UK economy but is under threat from ongoing costs rises, which the April increases have only exacerbated. Jobs are being lost, livelihoods under threat, communities set to lose precious assets, and consumers are experiencing price rises when wallets are already feeling the pinch.

“The Government must act urgently to mitigate for the changes to Employer NICs and also deliver on its promise of root and brand Business Rates reform.  The overall tax burden on our sector must be reduced, including consideration of the long-standing ask of a VAT cut for the sector, so the hospitality industry can return to investment, job creation, and growth in communities the length and breadth of the country.”