Hospitality insolvencies continue to rise

By Luke Nicholls

- Last updated on GMT

Related tags Bankruptcy Insolvency

The PwC analysis found there were 1,464 insolvencies in the H&L sector in the 12 months to October 2012
The PwC analysis found there were 1,464 insolvencies in the H&L sector in the 12 months to October 2012
Hospitality and leisure (H&L) was one of the worst-hit sectors in the UK in terms of insolvencies over the past year, a new report has found.

The latest PwC analysis of corporate insolvency numbers discovered that there were 1,464 insolvencies in the H&L sector in the 12 months to October 2012, compared with 1,304 the year before.

David Chubb, PwC business recovery partner and hospitality and leisure specialist, was quick to point out the positives in the latest figures, stating that “Pubs and restaurants have had a good quarter in the fight against the recession” - H&L insolvencies in quarter three 2012 were down by 15 per cent compared with quarter two.

“They continue to combat drops in discretionary spend by enticing consumers with promotions like set menu vouchers, happy hours, and multi buy deals,” added Chubb. “However, there are signs that consumers are now expecting this and are farming the offers without spending on additional courses or drinks which the promotion was priced to entice.  

“Consequently, operators are now having to consider the economics of the special offer strategy. We are seeing that parts of the pub sector are coming out of recession and there are some good news stories, but behind the figures it is still very clear that across the sector there are both winners and losers.  

“Under-invested pubs and over capacity will continue to be issues and consequently further closures are inevitable, but this has a positive impact for the survivors.”

Christmas boost

The biggest drop between quarters two and three was seen in hotels, which saw a 43 per cent fall, followed by travel & tourism and bars, which saw a 40 and 23 per cent decrease respectively.

Chubb believes quarter four will bring further relief for H&L businesses, adding: "Most of the businesses will be looking for an uplift in performance over the Christmas period and therefore I would expect a further drop in insolvencies in the next quarter.  

“Only time will tell if H&L insolvencies continue to decline beyond the Christmas period, but certainly recessionary pressures on leisure spend will continue over the next 12 months.   Limited spending is likely to focus around leisure activities with an element of treat and experience but despite the consumer squeeze, leisure remains a key component of consumer spending.”

Across all sectors the level of insolvency has continued to decline every quarter this year.  There were 3,296 incidences of insolvency across the UK in Q3 this year compared to 4,045 in Q3 2011.

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