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Hospitality sector under massive strain as insolvencies hit decade-high

Published:  08 February, 2023

The UK's ailing hospitality industry continues to face a perfect storm of labour shortages and soaring inflation, although there are some encouraging signs that the government is listening to its concerns.

Nevertheless, figures released this month make for sobering reading. According to The Insolvency Service, registered insolvencies in the accommodation and food services sector jumped 61% between 2021 and 2022.

According to the governmental department, “Insolvencies in the sector rose from 1,676 in 2021 to 2,704 in 2022. The total number of insolvencies in accommodation and food services last year was the highest annual total over a ten-year period (a rise of 77% from 1,524 in 2012).”

Paul Newman, partner and head of leisure and hospitality at RSM UK, commented: “It's the culmination of successive challenges which have led to these desperately sad statistics. For many hospitality operators who hoped to bring themselves back to health following the pandemic, 2022’s inflationary climate will have proved far too much to bear.

“These businesses have dealt with a toxic mix of factors including debts accrued during lockdowns, increased energy prices, staff shortages and rising input costs across everything from staff wages to raw ingredients. Not to mention industrial strike action across the rail networks which impacted Christmas trade for many. We expect the excess in insolvencies in the hospitality industry to continue for at least the first two quarters of 2023. But as the recession softens, liquidations in the sector should begin to tail off.”

However, there was a positive response to the restructuring of government departments this week, particularly the creation of a department tasked with focusing on energy security.

“Given the seismic impact that rising energy costs have had – and continue to have - on hospitality venues, the creation of a new department to focus on energy security is good news.

“The importance of energy to business operations cannot be overstated, especially at a time when so many other inflationary pressures are in play, so this separation within government must not lead to any disconnect in policymaking and engagement,” said CEO Kate Nicholls.

She added: “Hopefully, the restructuring of DCMS priorities will herald a new focus on the role tourism plays in the UK, contributing £75 billion to the economy, and as a key export trade. The department’s Tourism Recovery Plan is essential for the sector and I look forward to working together on its delivery.”

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