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Morning Briefing for pub, restaurant and food wervice operators

Fri 20th Jan 2023 - Energy crisis and rising costs drive hospitality closures above covid-hit 2021 levels
Energy crisis and rising costs drive hospitality closures above covid-hit 2021 levels: Unprecedented inflation in energy bills and other costs led to a net decline of 1,611 licensed premises in the fourth quarter of 2022, the latest Hospitality Market Monitor from CGA and AlixPartners reveals. It represents a 1.6% contraction of the market in just three months – equivalent to nearly 18 net closures every day. The research said if the current rate of closures continued, “we would see Britain’s number of licensed premises fall below 100,000 sometime this year”. Across the whole of 2022, the monitor reveals 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. This means hospitality suffered a higher tally of closures in 2022 than 2021, and only marginally fewer than 2020, when covid restrictions severely curtailed trading. The sector now has 13,037 fewer sites than at the start of the pandemic in March 2020, a contraction of more than 10% in under three years. Nearly nine in ten fourth-quarter closures occurred in the independent sector. The casual dining and restaurant sectors recorded net declines of 2% and 2.4% of sites, but nightclubs had an even sharper drop of 6%. This segment is now nearly a third smaller than it was before the pandemic. Community, food and high-street pubs all had a net decline of less than 1%, and losses were modest in the bar and large venue segments too. Karl Chessell, CGA’s director for hospitality operators and food, EMEA, said: “Given all the pressures, a drop of more than 1,600 venues in three months is quite shocking. Although consumers remain eager to visit pubs, bars and restaurants, thousands of vulnerable businesses remain at risk after three years of turmoil from covid and inflation.” Graeme Smith, managing director, AlixPartners, added: “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. What is clear is, absent of further government support, the energy crisis has the potential to take a bigger toll on hospitality than covid.” UKHospitality chief executive Kate Nicholls said: “Behind every one of these closures are dedicated people who have become victims of circumstances out of their control and are now being forced to exit the industry, shedding jobs in the process. Until business costs get under control, we will continue to see this level of closures. A focus on reducing the cost of doing business needs to be a priority focus for government.” Steve Alton, chief executive of the British Institute of Innkeeping, added: “Our nation's pubs have had to face significant challenges in recent years, with the pandemic leaving our members with average covid debts of £40,000 per pub. The crisis they face now, with rising energy bills of up to 500% or more, has affected every operator in our industry. Sadly, we will see more closures if we do not do something to protect them and the vital service they provide.”

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