South East: Pubs hit by increased risk of insolvency

The proportion of pubs in the South East at greater than normal risk of insolvency is the highest of any part of the UK, at over one in four public house businesses (26%).

This figure has increased by over 4% between August and September, according to new research by restructuring and insolvency trade body R3, compiled using Bureau Van Dijk’s Fame database, and equates to over 787 businesses. The increase is the biggest rise since August out of all 11 sectors monitored by R3.

The research also highlights that technology and IT, professional services (lawyers and accountants) and transport and haulage continue to be the three sectors with the greatest proportion of businesses at above average risk.

Technology and IT has an increase of over 3% and remains the sector most at risk in the South East with 37.7% of businesses now at a higher than normal risk of insolvency.

Professional services also had an increase of over 3% and its risk of insolvency sits at 36.7%, while transport and haulage only saw an increase of over 1.4% but its risk of insolvency has now reached 34%.

Mike Pavitt, chairman of R3's southern committee and partner and head of the corporate restructuring and insolvency group at solicitors Paris Smith, added: "The pub sector has seen a number of challenges over recent years but ultimately its success requires consumers to have both disposable income and to be culturally disposed to going out rather than staying in. As with all sectors which see stiff competition for consumer pounds, the businesses which thrive will be those which are best able to adapt to a changing marketplace.

"For so long as wage inflation continues to fail to keep up with price inflation, disposable income will inevitably be squeezed, which must place additional pressure on the pub sector, as will the continuing cultural shift towards personal entertainment devices and internet-based viewing, and away from collective entertainment such as sports coverage in pubs.

“There is also the effect from people ‘pre-loading’ so a lot of people will now go out having already had their initial drinks at supermarket prices at home. The national minimum wage is also putting pressure on pubs.

“Many pubs also rely at least in part upon EU migrant workers, and the continued uncertainty surrounding the Brexit negotiations will potentially result in a shortage of affordable labour to serve demand in the sector."