British pubs are facing an unprecedented crisis, with closures reaching a decade-high in 2023. This comes amid a wave of store closures that have swept the UK’s high streets.
According to recent analysis by Price Bailey, more than one in 10 pubs are at imminent risk of shutting their doors for good.
Over 2023, 769 pub businesses entered insolvency, up from 518 in 2022. This represents a 48 per cent increase from the previous decade-high total.
In the first half of 2024, 378 pub insolvencies were recorded, matching the record-breaking figures from the same period in 2023. This equates to 2.1 pub businesses failing every single day.
Price Bailey’s analysis of 37,961 UK pubs and bars revealed that 7,445 (20 per cent) have negative net assets, rendering them technically insolvent.
Of these, 4,310 are categorised as ‘Maximum Risk’, up from 3,380 a year ago. Businesses in this category struggle to secure funding without personal guarantees from directors.
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Britain’s high streets have been hit by a wave of store closures as of late PAMatt Howard, the head of the Insolvency and Recovery Team at Price Bailey, shared: “More than one in 10 British pubs are technically insolvent and at imminent risk of collapse.
“These businesses will find it almost impossible to access extra funding unless the owners provide personal guarantees, which few are likely to do in the current climate.”
A convergence of adverse factors is squeezing the hospitality sector. Pubs are grappling with high energy costs, rising labour expenses, and increased wholesale food and drink prices.
Simultaneously, pub-goers’ disposable income has struggled to keep pace with inflation in recent years. This economic pressure on consumers has further exacerbated the challenges faced by pubs.
The inflation rate for pubs remains stubbornly above the core rate, with little sign of relief in sight. This persistent inflationary pressure continues to erode profit margins.
Workers in the pub trade have benefited from rises in the National Living Wage, which has increased by over 40 per cent in five years. However, this has led to a situation where many pubs remain in the red for large parts of the trading week, despite improved turnover.
The Bank of England’s interest rate hikes have added further pressure on pubs. Starting at 3.5 per cent in early 2023, the rate climbed to 5.25 per cent by year-end. Despite a recent cut to five per cent, relief may be short-lived.
Government policies are set to compound the challenges. A sharp increase in the minimum wage is expected in the upcoming Autumn Statement. Additionally, proposals to ban smoking in pub gardens could further impact business.
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Wetherspoon has closed pubs but is adamant it will have 1,000GETTYHoward added: “If the Government announces an inflation-busting hike to the minimum wage in the Autumn Statement, many pubs that are currently on life support are likely to flatline.”
Many pubs are still struggling with debt accrued during Covid lockdowns. While August’s rate cut offered some respite, a significant increase in the National Living Wage could delay further rate cuts, prolonging financial strain.
“Many pub businesses have a legacy of barely serviceable levels of debt since the Covid lockdowns,” Howard said.
“August’s rate cut has taken some pressure off but if the National Living Wage gets a hefty increase, which feeds through to inflation, this could delay further rate cuts.”