The number of pub and bar companies that became insolvent increased by 9.4% in the last quarter, with 116 firms going under in Q2 2011.
That’s according to a study by accountancy firm Wilkins Kennedy, which said it compares to 106 companies in the sector collapsing in Q1. A total of 540 have become insolvent over the last 12 months, the study found.
The accountancy firm cited weakening consumer spending, competition from supermarkets, and tax rises, especially the 2%-above-duty rise in alcohol duty, which are “taking their toll on the industry”.
“The second quarter of 2011 has been particularly tough for bars, pubs and night clubs and the death toll keeps rising,” said Anthony Cork, partner at Wilkins Kennedy.
“Consumer confidence continues to be poor, curbing consumer spending on entertainment. Disposable incomes have fallen in real terms and uncertainty over job security means that people are keeping their purse strings tight.
“It seems that any boost to the pub industry you might have expected from the extra royal wedding bank holiday came too late for many struggling businesses.
“When consumer confidence is weak, people go out less, and when they do, they rein in their spend on food and drinks. This is hitting bars, pubs and night clubs particularly hard as they rely strongly on selling customers more than they expected to buy to keep margins high.”
He added: “No matter how drinking establishments deal with it, they find it hard to avoid the detrimental effect of the tax hike. Those that absorb the tax risk are seeing a decline in profits; those that pass the cost on to customers risk seeing a decline in sales.
“Supermarkets are continuing to increase the lines of niche and artisan drinks which is causing problems for some mid-market pubs and bars.”
Wilkins Kennedy listed five companies that have “experienced difficulty” over the last 12 months:
· Luminar. Currently in the middle of debt talks with its banks.
· Castle Inns. Went into administration in July 2011.
· Principle Leisure Group. Placed on the market after falling into administration in April 2011.
· Cougar Leisure. Entered administration in January 2011 and aimed to sell off its remaining six pubs and bars in northern England.
· Balls Brothers. Went bust at the end of November 2010.
