Bills blow

Rising costs cause more hospitality closures than Covid

Beehive Inn pub Grassmarket
Rising costs are proving more damaging than the Covid lockdown (pic: Terry Murden)

More hospitality businesses closed last year than in 2021 as soaring costs proved to have a bigger affect than the Covid pandemic.

There are now 13,037 fewer outlets across the UK than at the start of the pandemic in March 2020 – a contraction of more than 10% in under three years.

Higher energy bills and other costs led to a net decline of 1,611 licensed premises in the fourth quarter alone, according to the latest Hospitality Market Monitor from AlixPartners and CGA by Nielsen IQ.

It represents a 1.6% contraction of the market in just three months – equivalent to nearly 18 net closures every day.

Across the whole of 2022, hospitality recorded a drop of 4,809 premises, or 4.5% of the total at the end of 2021, with more than three quarters of the closures occurring in the second half of the year.

Many of 2022’s closures were the result of spiralling costs in energy, food and other key areas, which have hit profit margins and made real-terms growth difficult. Fragile consumer confidence, rail strikes and labour shortages are all adding to the headwinds facing hospitality operators in 2023

The Hospitality Market Monitor highlights the disproportionate impact of the inflation crisis on independents in hospitality. Nearly nine in 10 fourth-quarter closures occurred in the independent sector, as small businesses that were weakened by Covid were forced to close their doors.

Karl Chessell, CGA’s director for hospitality operators and food, EMEA, said: “While COVID took a heavy toll on hospitality, these figures suggest the energy crisis is having an even more damaging impact.

“Given all the pressures, a drop of more than 1,600 venues in three months is quite shocking and every closure represents a sad loss of jobs and disappointment for communities and operators.

“Although consumers remain eager to visit pubs, bars and restaurants, thousands of vulnerable businesses are at risk after three years of turmoil from Covid and inflation. Urgent and targeted government support is needed to sustain them through what promises to be another very difficult year.”

Graeme Smith, managing director, AlixPartners, said: “These latest figures are a stark snapshot of what the sector has faced over the course of the past three years. Since March 2020, 13,037 site closures – equivalent to 13 sites lost every day.

“While some segments have remained resilient, others have endured a more difficult time, with the casual dining sector, nightclubs and independent businesses suffering the highest closure rates, as costs and industrial action took their toll.

“What is clear is that, without further government support, the energy crisis has the potential to take a bigger toll on hospitality than Covid and if the current rate of closures continued, we would see Britain’s number of licensed premises fall below 100,000 some time this year.

“Not every business is suffering equally, but even the stronger operators with robust balance sheets are opting to conserve cash and wait out this storm at the current time.” 

See also: £27.50 a pint if BrewDog passed on energy costs

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.