FDBusiness.com

The hospitality industry accounted for 10% of administrations in the first six months of 2023 – the fourth highest sector in the UK – according to analysis by full-service law firm Shakespeare Martineau. A total of 759 businesses, 79 of which came from the hospitality industry, filed for administration between 1 January and 30 June 2023, marking a 22% increase compared to 2022.

Retail, manufacturing, construction, hospitality and real estate were the worst-hit sectors, accounting for 57% of all administrations. Greater London led the way with 25% of the filings, followed by the North West (15%) and South East (11%), data from The Gazette Official Public Record has revealed.

While administrations are still yet to hit pre-Covid levels (940 in the first six months of 2019), an insolvency and restructuring expert has warned that more businesses will fail unless inflation is controlled and interest rates stop being increased.

Andy Taylor (pictured above), partner and head of restructuring at Shakespeare Martineau, said: “Given the prolonged economic uncertainty that is plaguing the country, the increase in the number of businesses filing for administration is no surprise.

“HMRC is definitely taking a harder line than in previous periods and its threat of enforcement is certainly pushing some businesses towards considering their options, with some seeking administration as an alternative to facing a winding up petition.

“We’re seeing a steady flow of corporate failures. Should some other ‘bad news’ rear its head, then that is only likely to increase. Businesses and individuals need to see interest rates and inflation come down. With a period of stability, we will see confidence increase.”

With the sector’s filing almost doubling when compared with the first six months of 2022, the retail industry replaced construction as the worst-hit sector. The hospitality, real estate and manufacturing sectors also remained in the top five.

Andy Taylor added: “The sectors most impacted are feeling the effects of higher interest rates and inflation; the money in people’s pockets is now worth less so they are less likely to purchase none essential items and services, which is impacting the retail and hospitality sectors.

“Consumer spending is shrinking and footfall on the high street and in restaurants is declining as a result. The pressure is also on businesses as they face higher borrowing costs and energy expenses, so they are being squeezed from both sides.

“There is still uncertainty in the geopolitical landscape, which is impacting business confidence. With cash flow becoming tight, businesses are at a greater risk of going under. Supply chain issues and the rising cost of importing goods, especially in the automotive industry, have created a challenging juggling act for businesses to maintain profitability.”

Greater London remains the region where most businesses filed for administration. However, the North West overtook the South East for second place, and the West Midlands replaced the East of England in the top five.

Andy Taylor said: “Our advice remains consistent – seeking professional advice early can open up more options for struggling businesses. It is crucial not to ignore the signs and bury your head in the sand, and, instead, take a proactive approach to address underlying issues. By doing so, businesses can better navigate the tough trading conditions and increase their chances of survival.”