Death by a thousand cuts: Challenging period for the hospitality sector

31st January 2023

The hospitality sector in the UK is important to the economy and communities and it is facing a hugely challenging period. Restaurant insolvencies increased by 59% over the past year and have pressures from so many different angles.

Hospitality businesses across the UK are facing record breaking food price inflation, soaring energy bills, rising interest rates, difficulties recruiting and increase in the wage bill, the cost of living crisis, reduction in consumer spending and train strikes restricting people’s ability to travel.

As at the time of writing the Government has not offered any sector specific support package for the hospitality sector and without any decrease in its costs and without any significant increase in revenue, restaurant insolvencies will inevitably increase further. This will be a massive blow to the economy and communities. Restaurants provide a vital local meeting place and are a focal point for community events; they play an important role in supporting community life.

Unfortunately, it appears large numbers of restaurant insolvencies and restructurings are likely. Although, it is disappointing for communities, and business owners, those who work in this sector are resilient and extremely creative and passionate about their work and they will bounce back and grow with new companies operating a new restaurant business.

We just have to look at all the high-profile restaurateurs and chefs who have had to enter into insolvency processes but who are still operating in the hospitality sector: Carluccios, Byron Burgers, Ask and Frankie and Benny’s to name just a few. It has been, and continues to be, a rough time for entrepreneurs. Although there is inevitably going to be a large number of restaurants that will fail, these will be restructured and new businesses will be born. It is easy to be pessimistic but downturns often breed the most enduring companies. The hospitality sector will soon again be generating economic growth, contributing billions towards Treasury revenues, creating hundreds of thousands of jobs and providing new meeting points for communities.

If you need legal advice on insolvency or business support in the hospitality sector, please contact our specialist team.

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