There is some good news for pubs and restaurants ahead of the Festive Season with two reports showing improvements in trading and insolvencies, and some less good news with the rise in inflation in November.
This weeks company insolvency statistics for October show accommodation and food services insolvencies hitting their lowest level for two years with year-on-year rates down by 24% compared to October 2023.
Meanwhile, the latest CGA RSM Hospitality Business Tracker also reports signs of optimism with Britain’s leading hospitality groups reporting like for-like growth (adjusted to exclude factors like inflation, new openings, or closures) at 2.7%, the first real-term growth since June.
Managed restaurants performed best of the main hospitality segments, with like-for-like growth of 3.6%. This just topped a 3.1% increase for pub groups, which benefited from Halloween celebrations at the start of November. Among other channels, bars continued a long run of negative numbers, with sales down by 5.3% from the same month in 2023. On-the-go venues recorded 2.8% growth.
Karl Chessell, director – hospitality operators and food, EMEA at CGA by NIQ, said, “After struggling for real-terms growth for much of the Summer and Autumn, November’s trading figures represent a solid if unspectacular recovery. They are particularly welcome in light of the new burden placed on hospitality by the government’s Budget, but costs and margins will continue to be under severe pressure for some time to come.
“With the vital Christmas and New Year trading period looming, groups will now be keeping everything crossed for favourable weather and strong consumer confidence so they can end 2024 on a high.”
Saxon Moseley, partner and head of leisure and hospitality at RSM UK, said, “An early Christmas present for operators as insolvencies hit the lowest level in two years and continued a downward trend since the summer. With the festive trading period well underway, operators will be hoping to build up some reserves to help mitigate the impact of looming cost increases.
“The industry is bracing for a wave of post-budget headwinds with employment costs increasing and additional compliance changes under the Employment Rights Bill. For vulnerable businesses already struggling to make ends meet, this could well be a step too far and we expect to see an uptick in insolvencies across the industry next year as a result.
“This backdrop will create consolidation opportunities for operators looking to strengthen market position through strategic acquisitions and bring efficiencies to respond to the budget measures. In addition, as further pressure is applied, distress deals will drive a further wave of consolidation in 2025.”
The news came as the latest inflation figures show a rise to 2.6% in November – the highest for eight months, with GDP falling for the second consecutive month, and, along with wage inflation, hopes of a cut in interest rates were dashed as the Bank of England held rates at 4.75%.
Kate Nicholls, Chief Executive of UKHospitality, said, “The continued increase in inflation is concerning, and inevitably makes day-to-day life harder for businesses and consumers. Combined with lacklustre growth figures, it makes for a troubling economic picture.
“Despite these inflation figures, incentivising growth should remain the central goal for the Government, and the Bank of England can play an important role tomorrow by lowering interest rates.
“Changes to employer NICs, particularly lowering the threshold, remains the biggest barrier for hospitality businesses and we urgently need the Chancellor to rethink these changes to protect businesses and team members.”