It shows there were just under 104,000 licensed premises at the end of September 2022—a net drop of 2,230 since June, which represents an average of just over 24 closures a day, or more than 150 per week. This latest decline leaves the licensed market with 11,426 (or -9.9%) fewer sites than March 2020.
It follows a year of relative stability as hospitality built back from COVID, with the number of sites at June 2022 virtually the same as 12 months earlier. The closures over the last quarter follow a sharp rise in prices in energy, food and labour, and this trend looks likely to continue over the rest of 2022 without further government support.
The report from CGA and AlixPartners reveals a sharp contrast in the fortunes of managed hospitality groups and independent operators. While the number of managed sites is 3.0% below pre-COVID levels it increased by 0.9% (+179 sites) in the last three months, but the independent sector contracted by 2.6% (-1,751 sites). It reflects the greater resources and buying power of larger businesses compared to smaller firms, many of which are now very fragile.
In contrast to the managed-independent divide, the trend of steady closures over the last quarter has been notably consistent across different locations. High street, suburban and rural locations all recorded same net decline of 2.1% in licensed premises between June and September. By region, quarter-on-quarter declines varied only slightly, from a low of 1.6% in the south and south east to a high of 2.9% in Scotland.
The Monitor also highlights an ongoing contraction in the nightclub sector. Britain’s number of nightclubs has fallen by 5.6% in the last three months alone, and the sector now has around a quarter fewer sites (-309 sites) than it did before the pandemic in March 2020.
Karl Chessell, CGA’s business unit director for hospitality operators and food, EMEA, said: “These numbers show how hospitality’s steady recovery from COVID is now under severe threat from rising costs for businesses and consumers alike. The resilience and confidence of managed groups and their investors is impressive, and people’s appetite for eating and drinking out is undimmed. However, thousands of smaller businesses are now on a knife-edge and in need of financial support. Relief on energy bills has been welcome, but sustained backing and clarity of policy is needed if hospitality is to power the economic growth that the government is chasing.”
The findings of the Hospitality Market Monitor research are released quarterly and carried out in partnership with AlixPartners, the global business advisory firm.
Commenting, Graeme Smith, Managing Director at AlixPartners said: “This contraction is sharp and graphically illustrates the impact significant cost headwinds are having upon the UK bar and restaurant market. Given that this decline is already happening before an expected slowdown in consumer spending, it is reasonable to conclude that without increased support from government the closure rate will in all likelihood accelerate.
“This volatility will also inevitably trigger market activity as companies are forced to restructure and merge in order to find cost savings, and additionally, as those that can – with the strength of balance sheet and financial firepower – acquire other groups.”
UKHospitality Chief Executive Kate Nicholls said: “It is truly saddening to see this scale of losses over the last quarter. It’s not just the sites that the industry loses but the fantastic people involved and the huge value they add to the cultural and social fabric of a local community.
“Unfortunately, it is no longer a shock to see these high numbers of losses and it has become all too common an occurrence as businesses battle soaring energy costs, worker shortages and a cost-of-living crisis dampening consumer confidence. UKHospitality forecast this summer that we could lose 10% of the industry if adequate support was not offered and it would appear that prediction is bearing true.
“Prior to the pandemic, hospitality was the only sector due to generate real term growth and before the energy crisis hit it was forecast to grow 3%. It’s clear the economy needs hospitality to be firing on all cylinders and, while the government’s energy support package was very welcome, there now needs to be considered and urgent action to ensure businesses can survive. This should include business rates reform and lowering the rate of VAT.
“There is no time to waste – once these businesses are gone, they are gone for good. This scale of losses cannot continue – it must be avoided at all costs.”
The full October 2022 edition of the Hospitality Market Monitor from CGA and AlixPartners is available now – download the report.