UK hospitality insolvency crisis: 270 firms collapse in February as cost pressures mount

Rising energy costs, April tax increases, and relentless cost pressures hit UK pubs and restaurants hard

The rate of corporate collapse in hospitality surged in February, signalling the sector was battling to survive even before the Iran war triggered additional cost pressures.

The number of accommodation and food service companies entering insolvency leapt by 22 per cent to 270 in February, according to government figures.

This worsening of the crisis confronting hospitality enterprises occurred prior to the Iran war energy cost spike and April tax increases which two thirds of operators say will compel them to reduce headcount.

As many as 254 food and beverage service enterprises were compelled to close in February, including 171 restaurants and food trucks, and 64 pubs.

More than 700 pubs have closed in each of the past three years, with the rate of closures in the sector having accelerated since 2022, when only 512 shut their doors, as reported by City AM.

Pub operators expressed fury at Chancellor Rachel Reeves following modifications made to business rates at the Budget – designed to make the tax fairer for hospitality and retail businesses – which ultimately left thousands of landlords facing spiralling bills.

Reeves was ultimately compelled to introduce a £300m emergency business rates relief package, but landlords have stated rising energy costs stemming from the Iran war mean their difficulties are unlikely to diminish.

The chief executive of the UK’s oldest brewer, Shepherd Neame, told City AM the industry is “screaming for a reset” and cautioned his company is preparing for elevated energy bills. While some of the sector’s larger operators are shielded by long-term fixed-rate energy contracts, the chief executive of JD Wetherspoon told City AM he is having to “strain every sinew” to avoid rising the price of beer.

Trade body UKHospitality has warned that independent pubs – which may not benefit from fixed contracts – and those operating off-grid remain exposed to “devastating” energy bill hikes.

Saxon Moseley, head of leisure and hospitality at audit firm RSM, said: “While bigger operators tend to be better insulated due to having stronger balance sheets and economies of scale to fall back on, it’s the smaller, independent businesses that are struggling the most.”

Hotels are equally grappling with mounting costs, with 10 having closed in February while 16 accommodation firms collapsed in total during the month.

Senior figures at leading hotels and restaurants have criticised the Treasury for excluding their sectors from the business rates relief package – which was made available only to pubs.

Gordon Thompson, restructuring partner at RSM, said: “Relatively weak sales in the hospitality industry along with relentless cost pressures have required some operators to explore restructuring options to optimise their trading position and to reduce their cost base.

“It’s encouraging to see businesses taking action rather than burying their heads in the sand, but this highlights just how challenging it is to operate in the current environment.”