Hospitality insolvencies at highest level in seven years

Insolvencies in the hospitality sector increased by 10.4% in 2019, the highest amount in seven years, according to analysis by real estate adviser Altus Group under the Freedom of Information Act.

The Insolvency Service, an agency of The Department for Business, Energy and Industrial Strategy, paid out a total a £346m from the National Insurance Fund to former members of staff as a result of their employer entering into either administration, liquidation, a CVA or another form of corporate insolvency.

A total of £222.5m was paid out in redundancy pay, whilst £63.9m was for money that would have been earned working a notice period. Some £18.3m also went on unpaid holiday pay and £41.3m on outstanding payments for wages, overtime and commission owed.

The amount paid was up by 16% on the previous year, £48m higher than the £298m paid during 2018, and the highest amount paid out of the National Insurance Fund since 2012 – driven by the “high street crisis” as a result of a rise in insolvencies across the retail and hospitality sectors. 

The report said that businesses have battled the “perfect storm” of rising costs from business rates, “historically high rents” and minimum wages at a time of decreasing sales and Brexit uncertainty.

Robert Hayton, head of UK. business rates at Altus Group, said that whilst business rates are “rarely the sole driver for insolvencies, they certainly are a contributing factor”.

He added: “A fair and reformed system is within our grasp. If we are serious about ‘levelling up’ the economy to help struggling towns, rates bills must fall in line with declining rents whilst speeding up meritorious business rates appeals has to be a government priority. 

“Bringing some respite to the financial burden of rates through ending annual inflationary rises whilst incentivising, rather than penalising, investment will all deliver long term lasting benefit to the economy as a whole.”