Hospitality industry suffers ‘worrying’ increase in insolvencies

The latest PricewaterhouseCoopers (PwC) analysis into corporate insolvency has revealed a 32 per cent increase in insolvencies in the last quarter of 2011 compared to 2010 – there were 375 insolvencies in the hospitality and leisure sector compared with 289 a year earlier.

Restaurants, bars and hotels​

Restaurants have been hardest hit, with 190 insolvencies in Q4 of 2011 compared with 134 in 2010 – a 42 per cent increase. Bars have seen a 31 per cent rise, while hotel insolvencies have gone up by 23 per cent.

“Quarter four would normally be seen as a good time for bars and restaurants because of the festive season so it is worrying that both these sectors saw a marked increase in the number of insolvencies,” said David Chubb, PwC business recovery partner and hospitality and leisure specialist.

“We would normally expect to see more casualties in the post-Christmas period and we will have to wait to see whether this does occur or whether the early Christmas gloom resulted in some businesses failing earlier that would normally be the case.

Understanding customers’ needs​

“The post-Christmas blues are always a challenge for restaurants and bars but some businesses are still performing well and these are often those that have focussed on ensuring that they understand what their customers want and deliver without fail.

“Customers have a lot of choice and one bad experience in a bar or restaurant can lose that customer forever.”

In an entire breakdown of the UK’s hospitality and leisure industry, PwC's analysis shows that London continues to have the highest number of insolvencies with 941, an 8 per cent increase. The East Midlands had the biggest increase, with 27 per cent more insolvencies, while the most improvement was recorded in the South East where the number of insolvencies dropped by 21 per cent.