Pub closures surge again in Q2 breaking Q1 record
Pub closures reached back-to-back quarterly records in Q2 2023, smashing the previous unwanted benchmark set in Q1.
According to data obtained by Price Bailey, the Top 30 firm of chartered accountants, 223 pub businesses entered insolvency in Q2 2023, up from 200 in Q1.
In total, 729 pub businesses went bust over the last 12 months, representing an 80% increase on 2021/22 (405).
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The alarming closure rates have coincided with a host of adverse factors squeezing the hospitality sector, including high energy, labour and wholesale food and drink costs.
At the same time, the disposal income of pub-goers continues to fall amidst the cost-of-living crisis.
Recent policy decisions have also hit the pub sector hard – the Bank of England interest rate began the year at 3.5% but has been hiked aggressively over the past six months finishing at 5% by the end of Q2. Furthermore, the government’s £18 billion energy support package for businesses began to taper away at the end of Q1 meaning that energy costs for pub landlords have started to rise.
Other factors include the need to repay Covid support loans and strike action leaving many pubs in city centre locations losing out on vital trade over the festive season.
Matt Howard, head of the Insolvency and Recovery Team at Price Bailey, said: “Pub closures are rising at a rate unheard of in more than a decade. We are seeing a perfect storm of high inflation and interest rates at a time when many pubs are on life support.
“Aggressive interest rate hikes this year have really turned the screw just when it looked like the economy was stabilising. Many pub businesses have piled up barely manageable levels of debt over a testing few years and rate hikes are tipping an increasing number into the red.”
Howard added that there are a large number of zombie businesses in the pub sector, which have been barely surviving, sustained only by low-interest rates.
He continued: “As rates have risen banks have started to pressure them to make capital as well as interest repayments on loans. This has proved the final nail in the coffin for many pubs.
“Business failures in the pub trade are likely to continue to rise throughout the second half of the year,” Howard concluded.
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