Third of Britain's hospitality firms could go bust by end of year, trade bodies warn

More than a third of Britain's pubs, restaurants and hotels fear they could go bust by the end of the year as the cost of running their business becomes impossible, high-profile trade bodies have warned.

A survey of more than 500 businesses in the hospitality sector found that the vast majority are facing higher energy and food costs, which has sent confidence in the survival of their firm plummeting.

Major trade associations UKHospitality, the British Beer and Pub Association, The British Institute of Innkeeping, and Hospitality Ulster have joined forces to urge the UK Government to provide a lifeline for struggling firms.

The study found that 35 per cent of hospitality firms polled were expecting to be operating at a loss or be financially unviable by the end of the year. It comes as 96 per cent said they were experiencing higher energy costs, and 93 per cent complained of food price inflation.

According to the survey, 96 per cent of respondents are experiencing higher energy costs and 93 per cent face food price inflation (file image). Picture: Peter Summers/Getty Images.

Meanwhile, more than three-quarters of hospitality venues reported seeing a decline in people eating and drinking out in a sign that cost-of-living pressures have taken a toll on consumer spending, with 85 per cent expecting it to get worse.

In a joint statement, the industry bodies said: "The results clearly lay out the stark situation facing hospitality businesses, with many on the brink due to the cost-of-doing-business crisis. The vulnerability of the sector due to soaring energy costs, crippling rises in the cost of goods, and dampening consumer confidence is on full display in this survey and if urgent action isn't taken, it is looking incredibly likely that we will lose a significant chunk of Britain's iconic hospitality sector in the coming weeks and months.

"Hospitality has huge potential to be a real driver of economic growth, job-creation, and deliver millions to the Exchequer and our local economies. If the [UK] Government wants to be turbo-charging sectors of the economy, our dynamic hospitality industry is prime to grow. But it needs to survive this generational crisis first.

The trade bodies – which collectively represent tens of thousands of businesses across the UK – said further business rates relief was "critical" to avoid companies' facing a cliff-edge in April, when the new tax year begins. They added: "In the long-term, a move to cut VAT for hospitality would do wonders in giving consumers the confidence they need to support their local hospitality businesses, which are so important to our local communities and the economy." The bodies urged the new Prime Minister to work with the sector on its suggested measures.

The remarks come as a Michelin-starred restaurant in Whitby announced it has been forced to close, attributing the move to a lack of financial support.

Meanwhile, a separate study has found that more than two out of every five established UK small and medium enterprises (SMEs) – those with between ten and 100 employees – expect to shut their doors permanently, be forced to conduct mass redundancies, or close locations within the next 12 months. The recent survey by SME-focused Allica Bank, which polled 150 such firms across multiple industries, also found that about 40 per cent fear that their business will be “fatally or critically” hampered by any forthcoming recession.