According to Government statistics published today (21 January), accommodation and food services insolvencies rose 29% month-on-month between October and November 2024, from 253 to 327.
It marks the first month of post Budget insolvency data and follows three months of steady decline in the month-on-month figures.
Chancellor Rachel Reeves delivered her Autumn Budget in late October last year, during which she announced that National Insurance contributions for employers will go up from 13.8% to 15% in April this year, with the threshold at which businesses start paying National Insurance on a workers' earnings lowered from £9,100 to £5,000.
Additionally, hospitality businesses will face higher wage costs, with the National Living Wage set to increase by 6.7% to £12.21 per hour; and reduced business rates support, after the Chancellor confirmed the discount for hospitality would be reduced from 75% to 40%, capped at £110,000.
“The month-on-month rise in insolvencies in November could be an early warning sign of what’s to come for the hospitality industry,” says Saxon Moseley, partner and head of leisure and hospitality at RSM UK.
“The tax rises set to hit operators from April are likely to be the final straw for some.
“The lowering of the threshold for employers’ National Insurance contributions (NIC) is particularly damaging for the sector, given its reliance on part-time and casual workers.
“The unintended consequence could be that employers focus on utilising their existing workforce and full-time workers instead, putting younger individuals or those with caring responsibilities at a disadvantage.”
Moseley adds that despite households sitting on ‘record savings’, the consumer-led recovery that many operators are hoping for hasn’t come to fruition yet, putting a further strain on business finances.
“Those that are able to ride out the storm and navigate the hurdle of NIC changes in April will be well positioned to take advantage of the expected uptick in consumer confidence later on in the year,” he continues.
“There will also be consolidation opportunities for well capitalised operators as they look to grow and bring efficiencies through strategic acquisitions.”
