The hospitality industry accounted for 12% of administrations in 2023 – the third highest sector in the UK, according to new figures.
Analysis by law firm Shakespeare Martineau reveals a total of 1,641 businesses filed for administration last year, 190 of which came from the hospitality industry. This marks a 22% increase compared to 2022 and 91% rise in comparison to 2021.
Retail and construction were the worst-hit sectors respectively, with manufacturing and real estate following behind hospitality. Together, these sectors accounted for 59% of the administrations.
With administrations nearing pre-Covid levels (1,794), Shakespeare Martineau warns that sustained difficult trading periods combined with rising geopolitical tensions means more businesses could fail in 2024.
Andy Taylor, partner and head of restructuring at Shakespeare Martineau, said: “The significant uptick in the number of companies filing for administration in 2023 underscores the challenges faced by businesses amid changing consumer habits, financial pressures, and geopolitical uncertainties.
“A shift in consumer buying habits, exemplified by a challenging January for the hospitality sector, adds to the narrative of subdued spending. Moreover, HMRC continues to be more active, with threatened enforcement pushing businesses towards considering their options, and many opting for administration as an alternative to being wound up on a compulsory basis.
“Many predict the rate of inflation to continue its downward trajectory in 2024, perhaps even approaching Bank of England’s target of 2%. If that trend continues one might anticipate something like three interest rate cuts in 2024, which will hopefully stimulate growth. However, the economic landscape remains unpredictable, and our advice remains consistent – seeking professional advice early can open up more options for struggling businesses.”