Bars and pubs face “serious challenges” that could result in more business closures or failures, according to a new report from the UK’s leading independent insolvency firm.
Begbies Traynor suggests that “significant pressure” has been put on the trade by the introduction of the National Living Wage, unseasonable weather, England’s early exit from the Euros and the result of the EU referendum. However, the Olympics in August and the possibility of a late hot summer could provide a “much-needed boost”.
According to Begbies Traynor’s Red Flag Alert research, which monitors the financial health of UK companies, the number of bars and pubs which were dissolved in April to June this year increased by 53% to 831 compared to 531 in the second quarter of 2015.
Its research suggests that there will be no respite for the sector as one in five bars and pubs (21% or 2,754 companies out of 13,211 trading businesses) faced “significant financial distress” at the end of the second quarter of this year compared to 17% a year earlier.
England’s early exit and subsequently Wales’ from the Euros combined with the dip in consumer confidence over Brexit are described by Begbies Traynor as “unwelcome results for the industry which is already struggling to make ends meet”.
Julie Palmer, partner at Begbies Traynor, said: “The knock-on effect of England and Wales’ exits from the Euros and the damage to consumer confidence in light of the current economic and political uncertainty means the UK’s pubs and bars face serious challenges ahead that could result in more business closures or failures over the coming months.
“In addition, the longer-term impact of the introduction of the National Living Wage remains to be seen but, given the sector’s model of tight margins and low-cost staff, many businesses are already struggling to cope with the increased costs.
“Given the current financial state of many of the UK’s pubs and bars, many could be forced to either cut staff to reduce costs or face falling into the red.”
However, she provided some hope for the trade. “While England going out of the Euros would have been more disappointing to this sector than most, Andy Murray’s recent win at Wimbledon, the upcoming Olympics and the possibility of an Indian summer, should give this sector a much-needed boost.”