Thousands of bars, restaurants and pubs across the UK are pulling down their shutters for the final time as out-of-control ground rents, produce costs and no-show bookings continue to plague the industry.
There were more than 10 closures every day, according to industry data, which revealed the number of licensed premises in Britain fell by 3.6 per cent from 103,682 to 99,916 in the year to September.
This marks the first time the total has dropped below 100,000, according to the latest figures from AlixPartners and CGA/NielsenIQ.
The hospitality industry says it is crumbling under the joint pressures of rocketing energy, rent, and food bills, staff shortages, and no-show bookings, amid the ongoing cost of living crisis and the after-effects of Covid and Brexit.
Celebrity chef and restaurateur Tom Kerridge told The Independent the hospitality sector is facing “a number of massive issues”, with his business having lost more than £1m since Covid hit.
Following Brexit, the TV chef said food inflation and staffing have both been major problems, with a shortage of staff pushing up employment costs to unaffordable rates. However, he said, “The biggest pressure, what has tipped people over the edge, is the cost of energy.”
Kerridge’s flagship restaurant The Hand & Flowers, in Marlow, which is the only pub in the UK with two Michelin stars, was quoted a 700 per cent increase on its utility bills last year, he said.
These strains have had a “huge effect” on his business, which includes seven restaurants and pubs. It lost well over £1m since the start of the pandemic, he said, plus twice that in accounting losses that it is currently trying to earn back.
Martin McTague, national chair at the Federation of Small Businesses (FSB), said: “Increasing rents and input costs, coupled with inflation, high energy prices and low consumer demand have been chipping away at the hospitality industry, to the extent that more than half of small businesses in the sector are experiencing falling revenues, as well as rock bottom confidence levels. Employment costs spiralling due to labour shortages, rises in the national living wage and forthcoming changes to pensions legislation are all adding to the burden.”
Among the major sectors, the hospitality businesses had the lowest level of confidence, at -31.1 points for accommodation and food service activities, FSB’s smallbBusiness index Q3 2023 shows.
The organisation’s research further shows that more than half (56 per cent) of small hospitality businesses have come up against a significant increase in their running costs – of more than 10 per cent – in the last year.
Kerridge believes most restaurants, bars and pubs are merely hoping to break even at the end of the year, warning that many independent places will soon be forced to close. “It’s absolutely suffocating us,” he said. “The industry does need help and rapidly.”
On the same day last week, two high-profile restaurants announced they would be shutting their doors due to crippling costs.
Simon Rimmer, 60, who is a co-presenter on Channel 4’s Sunday Brunch, called last Tuesday a “heartbreaking day” as he confirmed the closure of his vegetarian restaurant Greens in West Didsbury, Manchester, 33 years after he opened it with friend Simon Connolly.
He posted a video to Twitter/X, explaining that an increase in rent by around 35 per cent as well as the rocketing costs of raw materials, heat, light, power, employing people, and general food had made the business unviable.
Tony Rodd, who was a MasterChef finalist in 2015, described how “devastated” and “heartbroken” he and his team are as he similarly announced the closure of his restaurant Copper & Ink in Blackheath, London on 2 January.
In a video posted to Twitter/X, Rodd also predicted the closure of many more independent restaurants in the near future, as the hospitality industry buckles under the combined strains of Covid, Brexit, the cost of living crisis, and soaring energy bills.
Jane Pendlebury, CEO of the Hospitality Professionals Association (Hospa), described the closure of numerous hospitality businesses across the UK as “truly disheartening”, blaming the continued financial strain the industry finds itself under.
She said: “Surges in food prices, rising energy costs and the inability to recruit adequate staff are all common features of the current hospitality landscape, and unfortunately, are forcing business owners to close their doors for good. The ongoing cost of living crisis in the UK only magnifies these issues, rendering it increasingly difficult for businesses to sustain viability – while also having a huge impact on consumer spending habits. Further complicating matters are the significant impacts of no-shows on bookings, posing a substantial challenge for hospitality businesses.”
House of Commons Library research commissioned by the Liberal Democrats revealed in December that almost 5,000 more hospitality and retail businesses closed compared to those that opened during the first nine months of the year.
Sarah Olney, business and Treasury spokesperson for the party, warned that once bustling UK high streets are being turned into “ghost towns”.
She told The Independent: “Far too many pubs, restaurants and cafes are closing their doors for the last time due to sky-high energy bills, borrowing costs and staff shortages. Our high streets are being turned into ghost towns because this Conservative government is failing to listen to their concerns.
“Rather than risking yet more hospitality closures, ministers should give small businesses the boost they need by reforming business rates; addressing skills shortages and helping businesses trade internationally by cutting red tape and paperwork.”
Kerridge criticised the government for prioritising the wrong areas and funnelling wasted cash into “ludicrous” projects, meanwhile, industries like hospitality are being “drained” and “left behind”. Calling on the government to halve rates of VAT from the current 20 per cent, he said: “That 10 per cent [reduction would be a] massive difference for businesses – that’s the difference between surviving and staying open, or closing. It’s a release of the pressure.”
Pendlebury said Hospa is supporting UKHospitality’s call for a VAT cut to help the industry keep prices low and bounce back. She urged an extension on the business rates relief imposed by the government, which she said could help prevent a 7 per cent increase in bills in March. She also advised business owners to maximise their use of technology for increased automation.
Mr McTague is calling for the government to look at employment costs in the round and help small employers through policies like uplifts in the employment allowance, as well as lifting the VAT threshold to £100,000.
A government spokesperson said: “At the Autumn statement the chancellor announced over £4bn of support for small businesses and the hospitality sector, including 75 per cent business rates relief and freezing alcohol duty rates.
“In 2021 we published the UK’s first hospitality strategy to improve the resilience of the sector and established a hospitality sector council to oversee its delivery. We’re working closely with the industry to tackle the challenges it faces, and we’ll continue helping them to grow and thrive in their local communities."
They added that the small business multiplier will be frozen at 49.9p for a fourth consecutive year.