Experts explain why restaurants and pubs are closing and 'challenging' reality
Hospitality businesses are facing huge financial pressures, with experts warning it is becoming “increasingly challenging” for restaurants and pubs to stay afloat.
Higher energy bills, a shortage of skilled workers and "no show" bookings are just some of the reasons being blamed on a rise of businesses shutting their doors for good. Just this week, ex-Masterchef finalist Tony Rodd, who appeared on the BBC cooking competition in 2015, announced he has closed his restaurant after its monthly energy bill tripled.
The chef had previously told The Sun about that his "terrifying" £80,000 energy bill left him struggling to sleep. A vegetarian restaurant in Manchester, run by TV chef Simon Rimmer, also closed this week after 33 years - with higher rent and running costs blamed.
Mr Rimmer said in a video on X: "Our landlords have increased our rent by in the region of 35%. The cost of raw materials, the cost of heat, light and power, employing people and general food costs have meant that the business unfortunately has become unviable, so with immediate effect we've unfortunately shut the door."
The number of licensed premises in Britain fell by 3.6% in the 12 months to September 2023, according to Hospitality Market Monitor from CGA by NIQ and AlixPartners. The 3,766 drop to 99,691 sites is equivalent to more than ten net closures every day. The total figure is also the first time the monitor has dropped below 100,000.
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Jane Pendlebury, CEO of The Hospitality Professionals Association, called it “extremely disheartening” to witness the closure of many restaurants. She told The Mirror: "Higher energy costs have undeniably added to the financial burden, but there are a range of other challenges contributing to this trend.
"The surge in food prices, coupled with supply chain disruptions and even rail strikes, has created a perfect storm for establishments already dealing with higher energy bills. Additionally, the industry is facing a shortage of skilled personnel, particularly chefs — whilst also experiencing difficulties in recruiting and retaining other essential roles such as waiting staff.
"Other things, such as no shows on bookings also have a huge impact on hospitality businesses. The public can help here, by being considerate of this and communicating with a restaurant or hotel if they’re unable to visit (whatever the reason), or if the number of people planning to dine changes, as we really are at the point where every little helps."
Pubs are also suffering due to higher costs (AFP via Getty Images)Emma McClarkin, CEO of the British Beer and Pub Association, told The Mirror that BBPA members have seen their energy bills shoot up by 60% between October 2022 and September 2023 - despite Ofgem data showing wholesale electricity and gas prices fell around 70% in the same time frame.
The BBPA is urging Chancellor Jeremy Hunt to cut beer duty, cap the business rates business multiplier and to level the playing feed by reducing VAT paid for non-alcoholic drinks and food. Ms McClarkin said: "Pubs have faced almost four years of acutely challenging trading conditions since the pandemic, which continue to take their toll and force closures. The cost of doing business is just too much."
She continued: "This combination of factors with taxes and business rates faced by the sector has created the perfect storm. We are now seeing the closure of successful businesses through no fault of their own. The beer and pub sector is a bellwether for the British economy and should be an economic multiplier in every local economy where a successful pub is a magnet for increased footfall and an essential part of high street revitalisation."
Lionel Benjamin, co-founder of AGO Hotels, also warned how business rates are "stretching hospitality businesses to the brink". The Government recently confirmed an extension of a 75% discount on business rates up to £110,000 - but this has only will only last until April 2025.
He said: "The recent business rate relief extension was a win for some, however, more needs to be done. It’s a tax on existence and nothing short of an overhaul will make a meaningful difference to the sector. Whilst there is available debt, high interest rates and banks appetite for risk having waned, businesses looking to refinance have found it difficult and will continue to do so into 2024 with some being forced out the market."
Richard Jeffery, National Director of GC Business, added: "Costs just keep going higher for the hospitality sector. Wages have grown in the economy, the cost of ingredients has risen and energy costs are still high… hospitality is struggling to keep up.
"Many hospitality businesses made it through the pandemic and through the initial period of the cost of living crisis and they had Christmas to look forward to, but the combination of the cost of living and the cost of doing business and the traditional challenge of the quiet January period is just tipping some over the edge.
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"It is a rewarding but tough sector. The good news is that the hospitality sector is very entrepreneurial, customers are keen to try new offers and there are opportunities to pivot. For example, delivery services are working with their customers to use data insights to increase the utilisation of kitchens and are now working with restaurants to set up virtual restaurants."
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