[UK] National Insurance and minimum wage rises lead to surge in pub closures

In the UK, according to new figures, pubs are closing at their fastest rate since summer 2024 following April's National Insurance and minimum wage changes, MSN reports.

In April, the number of pubs declaring insolvency leapt to 67, the highest number since July 2024, when 75 pubs went bust, accountancy firm Price Bailey said.

According to Price Bailey, insolvencies are starting to tick higher after a decline at the end of 2024, due to tax changes that took effect in April.

The rate of employer National Insurance Contributions (NICs) rose from 13.8 per cent to 15 per cent, while the threshold at which it is paid back was cut from £9,100 to £5,000.

The National Living Wage for workers aged 21 and above increased by 6.7 per cent to £12.21 an hour. Workers aged 18-20 saw their pay jump 16.3 per cent to £10 an hour.

The hospitality industry has reportedly urged the UK Government to reverse the NICs increase and offer a VAT cut on food and drinks sold in hospitality venues.

“The early signs are that the tax and minimum wage hikes which took effect in April are already tipping some struggling pubs over the edge,” Matt Howard - head of the insolvency and recovery team at Price Bailey - said.

“It was widely believed that pub businesses would initially find ways to absorb the additional payroll costs and that the full impact would only be felt much later in the year. 

“That the impact has been so immediate shows that many pubs had already exhausted their financial buffers.”

In addition, pubs are facing higher energy costs because, unlike households, they are not protected by a price cap. Some pubs are therefore operating at reduced capacity due to higher costs, and cannot capitalise on demand.

Mr Howard said, “Pubs are increasingly restricting opening hours to the most profitable times of the week. Many are having to sacrifice long-term customer relationships on the altar of profitability as they focus on the busiest hours.”

Price Bailey reportedly found that 21 per cent of the 8,156 operating pubs have negative net assets on their balance sheets, deeming them technically insolvent.

It said such pubs are “vulnerable to going bust (cash flow insolvent), which occurs when businesses are unable to make payments to suppliers or lenders.”

Of the affected pubs, more than half currently occupy the maximum credit risk category, making it a challenge to access funding without personal guarantees from directors. This represents an increase of 552 from 12 months ago.

Price Bailey did add that although large pub chains and small independent pubs are closing, craft breweries and themed pubs, such as the Boom Battle Bar chain, are becoming increasingly popular.

Source: MSN

(Quotes via original reporting)

In the UK, according to new figures, pubs are closing at their fastest rate since summer 2024 following April's National Insurance and minimum wage changes, MSN reports.

In April, the number of pubs declaring insolvency leapt to 67, the highest number since July 2024, when 75 pubs went bust, accountancy firm Price Bailey said.

According to Price Bailey, insolvencies are starting to tick higher after a decline at the end of 2024, due to tax changes that took effect in April.

The rate of employer National Insurance Contributions (NICs) rose from 13.8 per cent to 15 per cent, while the threshold at which it is paid back was cut from £9,100 to £5,000.

The National Living Wage for workers aged 21 and above increased by 6.7 per cent to £12.21 an hour. Workers aged 18-20 saw their pay jump 16.3 per cent to £10 an hour.

The hospitality industry has reportedly urged the UK Government to reverse the NICs increase and offer a VAT cut on food and drinks sold in hospitality venues.

“The early signs are that the tax and minimum wage hikes which took effect in April are already tipping some struggling pubs over the edge,” Matt Howard - head of the insolvency and recovery team at Price Bailey - said.

“It was widely believed that pub businesses would initially find ways to absorb the additional payroll costs and that the full impact would only be felt much later in the year. 

“That the impact has been so immediate shows that many pubs had already exhausted their financial buffers.”

In addition, pubs are facing higher energy costs because, unlike households, they are not protected by a price cap. Some pubs are therefore operating at reduced capacity due to higher costs, and cannot capitalise on demand.

Mr Howard said, “Pubs are increasingly restricting opening hours to the most profitable times of the week. Many are having to sacrifice long-term customer relationships on the altar of profitability as they focus on the busiest hours.”

Price Bailey reportedly found that 21 per cent of the 8,156 operating pubs have negative net assets on their balance sheets, deeming them technically insolvent.

It said such pubs are “vulnerable to going bust (cash flow insolvent), which occurs when businesses are unable to make payments to suppliers or lenders.”

Of the affected pubs, more than half currently occupy the maximum credit risk category, making it a challenge to access funding without personal guarantees from directors. This represents an increase of 552 from 12 months ago.

Price Bailey did add that although large pub chains and small independent pubs are closing, craft breweries and themed pubs, such as the Boom Battle Bar chain, are becoming increasingly popular.

Source: MSN

(Quotes via original reporting)