A couple of weeks ago I was asked to write up a story about the surge in insolvencies resulting from the “toxic mix” of soaring labour, food and energy costs.
Figures from Mazars, the corporate advisory outfit, suggested that insolvencies in the hospitality sector had leapt by 59%, with almost 1,600 companies hitting financial distress., including 453 in the past three months – up from 395 in the previous quarter.
Data from the Office for National Statistics backed up those findings, suggesting that just over a fifth of hospitality businesses had cut their trading hours as a result of the punishing economic headwinds. Throw in the sharp increase in interest costs on debts and you have a veritable cocktail of financial and economic woes.
To complete my story, I needed a few examples of hospitality sector insolvencies. The only problem was that I hadn’t actually written about any. Although I didn’t need to look very far. A swift perusal of the trade websites immediately threw up a swathe of freshly insolvent businesses, the first of which was a pre-pack administration of Ping Pong under the aegis of Begbies Traynor.
Next came the administration of AMT Coffee, a familiar sight on the railway platforms of London. Some 25 of the outlets were sold to SSP (a natural home for them), but 18 were closed with the loss of about 100 jobs, including head office posts. Interpath Advisory handled the process.
Another business to come up for grabs was Caffè Concerto, which appointed FRP Corporate Finance to sound out potential suitors, having earlier this year completed a company voluntary arrangement.
Let’s get personal
It is easy for business journalists to churn out stories about administrations and business closures, but what often gets lost is the personal side: these pubs and restaurants that are being forced to shut are run by people who in many cases have put life savings along with sweat and tears into making their business a success.
Over the weekend, Twitter was all aflutter over the closure of the Red Cup Café, near North Harrow station, seven years after its launch by Henal and Reena Chotai. The couple called the decision, taken directly as a result of rising costs, “soul-destroying, devastating and emotional”.
A statement on their Instagram page reads: “We have been hammered with a rental increase on a new lease extension, which is completely unaffordable for us in the current climate. A new energy contract early next year (on just electricity) would also add another £15,000 per year on our costs.”
The owners, who won the Good Food Award three years in a row, said the closure had been forced by a combination of the pandemic, the cost of living crisis, a “lack of support” from the government and overheads.
The café was appreciated not only by the local community in Harrow, but far and wide, so good was the quality of the food and the experience. Harry Murray, former chairman of Lucknam Park, the renowned country house hotel and a past Hotelier of the Year, said he was “deeply saddened to learn the heartbreaking news that my good friends Henal and Reena have been forced to close due to rising costs”. He called on the Prime Minister to “help these businesses to survive and help grow the economy”.
Henal said he could not understand why the hospitality industry was given valuable support during the pandemic yet nothing in the present crisis – a comment that sparked dozens of supportive responses from the Twitterati.
Let’s hope the couple make a swift return to the industry.
A shout out to Dean Banks, erstwhile MasterChef: The Professionals finalist, who continues to expand his business empire in the teeth of three of the toughest years in living memory. The chef, now the boss of the Dean Banks Group, has just opened a pub, The Forager, in Dollar, Clackmannanshire.
The Forager joins a growing operation on the East Coast of Scotland, including Haar, in St Andrews, the fine dining Pompadour restaurant at the Caledonian Hotel, in Edinburgh, and Dulse, a seafood restaurant in Edinburgh.
Dean, who during the pandemic also launched Haar at Home, is fast building a restaurant empire to rival those of Rick Stein and Paul Ainsworth in the West Country. He has yet to garner the same high profile, but it is only a matter of time.
Dominic Walsh is a business reporter at The Times
