Hospitality in ‘perilous state’ as quarter of businesses run out of cash

By James McAllister

- Last updated on GMT

Hospitality in ‘perilous state’ as quarter of businesses run out of cash
Hospitality’s leading trade bodies have warned that the sector is in a ‘perilous state’ after new research found a quarter of businesses have no cash reserves.

The joint survey by UKHospitality, the British Beer and Pub Association, British Institute of Innkeeping, and Hospitality Ulster also found that a further 29% of businesses have less than three months’ worth of cash reserves left.

Rising costs to food and drink, wages and energy have left almost two-thirds (64%) of businesses ‘not optimistic’ about their prospects for the next 12 months, an increase of 6% compared to October 2023.

Respondents were clear about their priorities for Government action at the forthcoming Budget, which takes place early next month, with 94% prioritising a lower rate of VAT.

A lower business rates multiplier for hospitality (80%) and business rates reform (71%) rounded out the top three priorities.

Reducing employer National Insurance Contributions (51%), further energy support (48%), capping the business rates increase in April (44%) and reducing the rate of alcohol duty (44%) were also popular amongst respondents.

In a joint statement, the trade bodies said: “These results clearly show the perilous state our pubs, restaurants, hotels and cafes find themselves in. The fact that a quarter have run out of cash reserves completely is a real cause for concern. Those businesses are extremely vulnerable to the slightest shock forcing them to shut their doors for good.

“We’ve already seen too many good businesses shut up shop and that has left cities, towns and villages without a vital community asset where people can meet, host events and share enjoyable experiences.

“These businesses need urgent support. Hospitality is the foundation of the everyday economy and absolutely vital in the services they provide.

“Measures to help the sector won’t just keep businesses afloat, but it will inevitably lead to further investment from the sector, which has a proven track record of driving economic growth, creating jobs and creating fulfilling careers.

“It’s clear that practically no business has been immune to the relentless price increases that have plagued the sector and can absorb costs no longer, with many already forced to pass these onto customers.

“If the Government want to avoid further inflationary price rises for the public and further closures across hospitality, they need to heed the message from our members to act now.

“Addressing the looming business rates increase, implementing a lower rate of VAT for hospitality and cutting duty would be good news for businesses, consumers and the economy. We urge the Chancellor to act at his Budget next month.”

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