Hospitality businesses more likely to go bust

23 April 2007 by
Hospitality businesses more likely to go bust

Hospitality businesses are three times more likely to go bust than other UK businesses, according to research released today.

The study of more than 150,000 business failures over the past year, by accountancy firm UHY Hacker Young, reveals that 15.5% of businesses in the UK hospitality sector (restaurants, pubs and hotels) went under, compared with 5.2% for the economy as a whole.

According to UHY, difficulty in raising second round financing, poor market research and financial planning and the challenge of building a loyal client base that can protect against rapidly changing consumer tastes, are all to blame for the high failure rate.

Peter Kubik, Partner at UHY Hacker Young, said: "There are lots of anecdotal warnings about the failure of restaurants in their first year and they are all true.

"The restaurant business is a very competitive sector. It takes time to build a loyal client base. With few assets against which restaurants can raise working capital, keeping the business running, while trying to build that reputation is tricky."

According to Kubik, increasingly it is the taxman which sends businesses to the wall.

"Before Revenue & Customs lost its preferred creditor status it was more relaxed about late payment, but now it is far more likely to pull the plug," he said.

Rises in the minimum wage and long-term increases in alcohol duty on beer and wines have hit pubs and hotels hard and not all operators are successful in passing on the whole cost to customers, Kubik added.

Hospitality and leisure firms under pressure >>

Benjys collapses into administration >>

Definnitive Leisure goes into administration >>
View more trends and data here >>

By Daniel Thomas

E-mail your comments to Daniel Thomas here.

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