UK Hospitality is calling for 3 Key actions to support the hospitality industry. But how can Insolvency Practitioners help already struggling businesses?
Many business sectors were hard hit by the pandemic and now by on-going high inflation, high interest rates, high energy costs, increased minimum wages and supply chain difficulties, with the hospitality industry being one of the hardest hit. Recent research by Alix Partners CGA Hospitality Market Monitor has shown that over 6,180 licensed premises closed in 2023, bringing the total number of closures since December 2020 to 22,859. At the same time the number of new openings has slowed for the third year in a row, from 4,532 in 2021 to 3,333 in 2023, meaning that the net contraction of licensed premises in 2023 alone was 2,958. These are big and worrying numbers for the industry.
In this article we look at three key changes that UK Hospitality, the trade body for hospitality in the UK led by CEO Kate Nicholls, is asking for the Government to make to support the industry. However, we also know that many hospitality businesses are already struggling financially and for some any changes could come too late, so we also look at how Insolvency Practitioners can help distressed businesses.
The three key support measures proposed by UK Hospitality
- A 3% cap on business rates increases
“The proposed 6.7% increase to business rates for up to 20,000 hospitality businesses will push yet more businesses to failure. For those that survive, it will simply divert spending earmarked for investment into the higher rates payments.”
- Temporary changes to employer National Insurance Contributions
“A cut in the lower rate of employer NICs to 10% and increasing the threshold at which contributions are made by the employer will help businesses manage the increase in the National Living Wage.”
- A lower rate of VAT for hospitality, leisure and tourism
“A 12.5% VAT rate is proven to boost demand, generate revenue and keep prices low. It is the single greatest catalyst for growth in hospitality, with 70% of businesses passing through reduced prices to customers.”
As UK Hospitality says, such action needs to be taken “to support business survival, protect jobs and provide the conditions for rapid growth” in the hospitality industry. The main thrust of the measures is to have a “downward impact on prices and drive investment for growth in the immediate term.”
How can Insolvency Practitioners help?
Whether the Government will offer support of this kind to the hospitality industry, either in the forthcoming March 6th 2024 budget, or perhaps before the next election is due (by January 2025) remains to be seen. However, there is no doubt that current conditions are driving many more hospitality businesses to breaking point and further insolvencies are inevitable. We have had an increasing number of enquiries in this area in recent months. Indeed, for some businesses, any changes of the type that UK Hospitality are supporting may, sadly, already be too late.
As with all businesses, our advice is for directors to act as soon as possible if financial difficulties are mounting. Some of the main options for struggling businesses are:
- Negotiating a Time to Pay (TTP) Arrangement with HMRC. A TTP arrangement is a structured payment plan with HMRC that gives businesses time to pay back what they owe. We are experienced in dealing with HMRC in such matters.
- Additional Finance. We have professional contacts with multiple lenders who could help find the right deal for extra funding.
- A Company Voluntary Arrangement. If creditors are demanding the money they are owed, the CVA process allows for directors (with the support of an insolvency practitioner) to propose a structured repayment plan over a period of time, and/or for a percentage of the debts owed. If successful this would mean a potential write off of part of the debt or further time to plan payment, and avoid insolvent liquidation.
Contact Us
Our advice is that if you know that the underlying position of your company is problematic then act now. The sooner you contact one of the Licensed Insolvency Practitioners at Antony Batty & Company, the sooner we can recommend a solution. We will talk you through all the options available, so that you know exactly where you are, helping you to make the best possible decisions. This initial phase, before formal appointment, comes at no cost and with no obligation.
In the meantime, if you need our help and advice in any of our specialist insolvency areas, please contact us or call any of our offices, below, for a FREE initial discussion on the phone or over a coffee, with one of our Licensed Insolvency Practitioners.
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