Unprecedented inflation in energy bills and other costs led to a net decline of 1,611 licensed premises in Q4, according to the Hospitality Market Monitor from AlixPartners and CGA by Nielsen IQ.
It represents a 1.6% contraction of the market in just three months. Across the whole of 2022, hospitality recorded a drop of 4,809 premises, or 4.5% of the total at the end of 2021, with more than three quarters of the closures occurring in the second half of the year.
British Beer & Pub Association (BBPA) chief executive Emma McClarkin said: “The energy crisis is an existential threat to our pubs. These figures show how out of control costs and suppliers are. They are decimating hospitality and destroying the places we love.”
The report stated hospitality has suffered a higher tally of closures in 2022 than 2021, when Covid restrictions severely curtailed trading. The sector now has 13,037 fewer sites than at the start of the pandemic in March 2020 – a contraction of more than 10% in under three years.
Many of 2022’s closures were the result of spiralling costs in energy, food and other key areas, which have hit profit margins and made real-terms growth difficult. Fragile consumer confidence, rail strikes and labour shortages are all adding to the headwinds facing hospitality operators in 2023.
The Hospitality Market Monitor highlighted the disproportionate impact of the inflation crisis on independents in hospitality. Almost nine in 10 fourth-quarter closures occurred in the independent sector, as small businesses that were weakened by Covid were forced to close their doors while managed groups proved more resilient.
CGA director for hospitality operators and food, EMEA, Karl Chessell, said: “While Covid took a heavy toll on hospitality, these figures suggest the energy crisis is having an even more damaging impact.
“Given all the pressures, a drop of more than 1,600 venues in three months is quite shocking and every closure represents a sad loss of jobs and disappointment for communities and operators.
“Although consumers remain eager to visit pubs, bars and restaurants, thousands of vulnerable businesses are at risk after three years of turmoil from Covid and inflation. Urgent and targeted government support is needed to sustain them through what promises to be another very difficult year.”
Graeme Smith, managing director, AlixPartners, said the equivalent to 13 sites have been lost every day since the pandemic began in March 2020.
“While some segments have remained resilient,” Smith said. “Others have endured a more difficult time, with the casual dining sector, nightclubs and independent businesses suffering the highest closure rates, as costs and industrial action took their toll.
“What is clear is that, without further Government support, the energy crisis has the potential to take a bigger toll on hospitality than Covid and if the current rate of closures continued, we would see Britain’s number of licensed premises fall below 100,000 some time this year.”
McClarkin of the BBPA added: “After multiple lockdowns we thought we’d come through the worst time but eye-watering energy bills have gone beyond that in terms of pushing publicans to breaking point. This crisis is forcing people to give up their businesses, and in some cases, their homes as well if they live above their pub.
“If the Government won’t reconsider increasing energy support for businesses beyond April it must crack down on the suppliers who are taking advantage of the market and introduce longer-term support for our sector by lowering the unfair tax burden on pubs and brewers.
“Failure to intervene now will only help this trend of closures to continue with hundreds, if not thousands, more pubs lost in communities in every neighbourhood across the country.”