Analysis of Red Flag Alert data by BTG (the new name of Begbies Traynor Group) showed despite a 15.8% drop in the number of hospitality liquidations in the period, the current rate is above pre-Covid levels - up 45% in 2025 compared to 2019.
Furthermore, when the sub-sectors of ‘bars & restaurants’ were analysed, it found the number in ‘significant distress’ was up 1.8% for public houses and bars in the fourth quarter of 2025.
BTG managing partner Julie Palmer warned concerns about business rates continue to weigh heavily on operators.
She also called for a long-term approach as firms should focus on survival and recovery rather than “firefighting”.
Rising costs
Palmer added: “Hospitality leaders have not made their feelings about business rates a secret and though there may now be a helping of cash for pubs, other parts of the industry will be left feeling hungry for support.
“Consumer behaviour has moved away from spending on food and drink towards saving and many are opting for the supermarket over the pub if they are spending.
“This means the market is shrinking as businesses in this sector face further rising costs from rates, minimum wage increases, energy and produce.
“In what is usually a difficult first quarter for the industry, there will be many who are nervously peering over a cliff edge.
“Our analysis shows even though the rate of hospitality liquidations has slowed, the businesses in financial distress is not falling.
“The impact of the Budget’s fallout on the sector is yet to be seen in full but the likelihood is rising costs and a lack of spending will see the downward trend in liquidations reverse this year.”
Palmer also highlighted the labour crisis hitting the sector particularly hard and how upcoming wage hikes are likely to make hiring even more difficult.
“The unemployment crisis more acutely impacting hospitality and retail will also put further pressure on businesses and owners with further minimum wage hikes later in the year likely to further prevent hiring," she added.
“A focus on survival and recovery in the long term is needed, not just fighting fires and plastering over the cracks.
“For businesses this means remaining agile to keep up with fast-changing consumer behaviour and maintaining a strong bottom line to keep afloat when the market produces further challenges.
“For [the] Government, it likely requires nuance and flexibility in policy.
“This means encouraging employment of young people in an industry that relies heavily on the under 25 demographic, relieves some of the cost burden of rates and energy and improving margins for businesses across the supply chain.
“Businesses will be trying to confront distress early, identify weaknesses, drive profitability and renegotiate more sustainable terms with lenders.
“Though we may see shops, pubs, bars, restaurants and hotels shut up shop for good this year, it could lay foundations for others to grow and the landscape to evolve.
“We will see distressed businesses with potential snapped up and turned around by bigger companies and we will see survival.
“Under these kinds of challenging conditions, the businesses that remain will be those that can transform and evolve.”
Survival strategy
BTG Eddisons director Andy Thompson echoed concerns about the pressures facing operators and said for many struggling businesses, particularly multi-site groups, the best route to survival and recovering value may be selling disused or underperforming sites.
He added: “This is common practice for developers and housing associations and while it is always a shame to see a much-loved business disappear, sale and repurposing often helps breathe new life into a community and helps other businesses thrive.
“Our city centres, high streets and suburbs are ever evolving and there is a balance that needs to be achieved.
Housing demand depended on strong local amenities, he said, while those businesses can only thrive if increased housing brought more people to an area.
“Every area across the UK is different and demands and necessities may vary, but there must be a balance between homes and businesses,” Thompson said.
“Neither communities nor businesses benefit from derelict buildings and the value they can offer needs to be unlocked by putting them back into use.
“We are seeing more companies and public sector organisations opting for actions to do this quicker and we expect to see this trend continue as value is sought from surplus property.”
