Usually, Christmas and New Year will see bars and restaurants full to bursting and business owners reaping the rewards of a busy few weeks as their customers wind down at the end of the year. After two years of navigating repeated lockdowns and covid related restrictions, this industry was hopeful for normal Christmas trading to return and possibly ease the pressure financially.

Unfortunately 2022 had other plans. Rather than bracing for a bumper Christmas, the industry is bracing for a bumpy ride and hoping to come out the other side relatively unscathed. But the fact remains, insolvencies in the sector are happening at a faster rate than when the Covid pandemic was in full swing. Let’s take a look at the numbers.

How many food and drink companies are turning insolvent?

The warning signs for this industry have been flashing throughout the year. In 2021/2022 over 1,500 restaurants entered insolvency proceedings which was an increase of 60%. In 2020/2021 there were 984 restaurant closures.

Industry bodies fear a third of the sector will close in the New Year

A recent joint report by UK Hospitality, the British Beer and Pub Association (BBPA), the British Institute of Innkeeping (BII) and Hospitality Ulster shared some startling statistics from their quarterly hospitality survey:

• 35% of respondents expected to be operating at a loss or to be unable to continue trading by the end of the year
• 77% reported a decrease in diners and drinkers
• 85% expected the situation to worsen

What’s impacting trade for the food and drinks industry?

Any one of these problems would cause the business owners a headache, but with them all falling at the same time, it could be crippling:

• Skilled staff shortages and increased wage costs

The industry is experiencing higher wage inflation as a result of post-Brexit migration rules impacting access to skilled staff from the EU, and the increases to minimum wage rates coming in April.

• Increased costs squeezing profit margins

Energy costs. Staff costs. Food costs. All have increased significantly this year and either have to be passed onto the customer or, if possible, absorbed into margins. But from the companies we’re talking to, there is little margin left as a buffer for anything else.

• Customers spending less

People are dining out less as a result of the cost of living increases they are having to manage too. If they can dine out, what they would be spending is less than previous years, or they are opting to stay at home instead. 

• Covid related support still needs repaying

Restaurant and bar owners still carry the debt from the Covid pandemic with them, and there is no further support on the horizon coming their way.

Cases we’re dealing with

Here’s some recent examples of businesses in the sector that we’re currently helping:

A struggling bar and restaurant was rebranded and was proving very successful until March 2020. The enforced shut down took its toll and whilst the company was able to take advantage of the Covid support packages the landlord insisted on full rent being paid (albeit deferred). The director himself became quite ill with Covid adding further strain on the business. Whilst trade began to pick up significantly, the last few months have seen a noticeable decline, which the director believes is a direct impact of the increase in the cost of living.

We are also helping another Pub in Southampton with very similar issues, additionally citing the substantial increase in utility costs in the last 12 months.

With landlords facing their own financial challenges, there seems to be a fine line between standing firm on rent payments and forcing companies out of business.

How TruSolv can help

We appreciate you are extremely busy doing everything you can to bring customers in over the festive period, but what about after that, it’s always good to have a plan.

It costs nothing to pick up the phone to us and you aren’t obligated to use our services, but it could be the call that puts your mind at rest, knowing a team of experts are here to help. Call us on 0808 196 8676.