Analysis of Government figures by audit, tax and consulting firm RSM UK this week showed insolvencies in the accommodation and food services industry were down 7% year-on-year, from 3,737 in 2023 to 3,464 in December 2024.
Insolvencies in the sector saw an even bigger drop month-on-month, down 31% from 327 in November 2024 to 224 in December 2024.
Moreover, the number fell 29% when compared to the same month in the previous year (315).
Christmas gift
RSM UK partner and head of leisure and hospitality Saxon Moseley said: “Food and accommodation insolvencies in December fell to their lowest level in over two years, providing a welcome Christmas gift for the sector.
“For some operators, December would have been the last roll of the dice to take advantage of the festive trade and build up a war chest of reserves.”
However, despite the fall in insolvencies, Moseley warned there was still “caution ahead” as operators juggle “fragile consumer confidence plus a deluge of upcoming tax and regulatory changes”, which are set to see operating costs surge.
Weather the storm
He continued: “Struggling businesses may have been able to limp through the busiest month of the year in December but with cost increases on the horizon, some may be weighing up their options.
“With real wages now growing at 2.5% - the fastest rate in four years – this should eventually feed through to higher household consumption and provide a boost to the hospitality industry.
“Businesses that can hold on and weather the storm of National Insurance rises will reap the benefits of an uptick in consumer spending, which is expected to come later this year.”
Last month, RSM UK warned tax rises set to come into force in April, including a lower threshold for employers’ national insurance contributions (NICs), could be the “final straw” for some hospitality businesses.
