Britain’s licensed sector – the universe of pubs, bars, restaurants, cafes, and hotels – saw a net decline of one closure every hour in the third quarter of 2022.

Our latest Hospitality Market Monitor reveals that there were just under 104,000 licensed premises at the end of September 2022, a net drop of 2,230 since June, which represents an average of just over 24 closures a day, or more than 150 per week. 

It is evidently an extremely tough and testing trading environment, and some independent businesses are demonstrably facing an existential crisis. For others, the challenges are critical but not insurmountable. For the few, the current conditions will herald significant opportunities to consolidate and grow their position. 

The closures during the last quarter follow a sharp rise in prices in energy, food, and labour, and this trend looks likely to continue over the rest of 2022 without urgent further government support.

The report reveals a sharp contrast in the fortunes of managed hospitality groups and independent operators. While the number of managed sites is 3.0% below pre-COVID levels, it increased by 0.9% (+179 sites) in the last three months. However, the independent sector contracted by 2.6% (-1,751 sites) in the same period, reflecting the greater resources and buying power of larger businesses compared to smaller firms, many of which are now very fragile.

It is telling that smaller and independent businesses – those typically with less scale, financial firepower, and coping mechanisms – are already suffering. Some have succumbed to the chronic cost crisis that is stifling or entirely eradicating profits and undermining hitherto viable business models. However, the reality is that these closures have come before any visible softening of consumer spending or frequency of visit which, if it materialises, will further threaten viability.

There are so many uncertainties in play that it is difficult to predict the shape of any likely downturn or the impact on leisure and hospitality spending. However, it feels reasonable to assume that this degree of volatility will inevitably trigger market activity, as some companies are forced to restructure. Well-run businesses with strong balance sheets will, as ever, weather the storm, seize opportunities and get stronger.  

All eyes now turn to the Christmas trading period, which last year was severely impacted by the Omicron outbreak. This year it could offer a silver lining if it is a period free of restraints and restrictions. Hospitality and socialising offer respite from personal concerns and challenges as it always has done, and will continue to do so.