Unprecedented inflation in energy bills and other costs is taking a heavy toll on the UK hospitality industry, which is now suffering more business closures than it did at the height of Covid restrictions.
In the fourth quarter of 2022, there was a 1,611 net decline in the number of licensed premises operating in the UK, which represents a 1.6% contraction of the total market in just three months – equivalent to nearly 18 net closures every day.
According to the new Hospitality Market Monitor from AlixPartners and CGA by Nielsen IQ, in 2022 as a whole, hospitality recorded a drop of 4,809 premises, or 4.5% of the total that were open at the end of 2021, with more than three quarters of these closures occurring in the second half of the year.
This means the sector has suffered a higher tally of closures in 2022 than in 2021, when Covid restrictions severely curtailed trading. Since the start of the pandemic in March 2020, the industry has shrunk by 13,037 sites – a contraction of more than 10% in under three years.
The Hospitality Market Monitor highlights the ‘disproportionate’ impact of the inflation crisis on independents in hospitality – early 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.
CGA’s director for hospitality operators and food, Karl Chessell, 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.”
Managing director at AlixPartners, Graeme Smith, 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,” warned Mr Smith.
“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.”
