Insolvencies across hospitality businesses up 10%

By Nikkie Thatcher

- Last updated on GMT

Count the cost: Altus Group research found millions was paid out in redundancy, unpaid holiday and outstanding wages
Count the cost: Altus Group research found millions was paid out in redundancy, unpaid holiday and outstanding wages

Related tags: Insolvency, Hospitality

Underlying company insolvencies in England and Wales increased for accommodation, food and beverage companies by 10.4%, new analysis has found.

Research from real estate adviser Altus Group discovered during 2019, The Insolvency Service paid out more than £346m from the national insurance fund to former members of staff as a result of their employer entering into administration, liquidation, a CVA or another form of corporate insolvency – the highest amount in seven years.

Some £222.5m was paid out as redundancy cash while £63.9m was for money that would have been earned working a notice period.

Furthermore, £18.3m went on unpaid holiday pay and £41.4m on outstanding payments for wages, overtime and commission owed, research released to Altus Group under the Freedom of Information Act found.

The amount paid out rose by 16% on the previous year, £48m more than the £298m paid during 2018, which Altus Group claimed was driven by the high street crisis as a result of an increase in insolvencies across the retail and hospitality sectors.

Contributory factor

Altus Group head of UK business rates Robert Hayton said while business rates were rarely the sole driver for insolvencies, they are certainly a contributory factor.

He added: “A fair and reformed system is within our grasp. If we are serious about ‘levelling up’ the economy to help struggling towns, rates bills must fall in line with declining rents while speeding up meritorious business rates appeals has to be a Government priority.

“Bringing some respite to the financial burden of rates through ending annual inflationary rises while incentivising, rather than penalising, investment will all deliver long-term lasting benefit to the economy as a whole.”

This followed Altus Group rating chairman Stephen Philp calling for action to be taken to reform the Valuations Office Agency,​ which he labelled as “under-resourced”.

Speaking to delegates at The Morning Advertiser​​’s MA500 conference in London earlier this month (Thursday 13 February), he said there was a “starvation of resource”, which prevented efficiency in processing publicans’ appeals. 

Concrete action

The current Check, Challenge, Appeal system was introduced in 2017 for businesses to appeal their rateable value and business rates bills. 

Philp pointed to how there is a 12-month window for the Check process and then a further 18 months once a case has been moved into the Challenge stage.

He said: “But concrete action is now needed. The situation is salvageable but more resource must be found now for the VOA, which is being asked to do more with less. 

“The Government should also look to immediately change the law to reduce the maximum response time from 18 months to a more acceptable timescale in respect of submitted Challenges.”

Related topics: Legislation

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