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14 December 2010

Number of bar companies going bust soars by 31% compared to the last year

Worrying sign that bar companies are calling time so close to the highly profitable Christmas trading season
Bar owners call for Government to ban low-cost alcohol sales
Pubs and bars hit by snow

The number of bar and pub companies going bust has soared by 31% in the last year which is spreading concern in the industry, according to research by Top 22 accountancy firm Wilkins Kennedy.

Wilkins Kennedy’s research found that, despite the recovering economy, 130 bar companies went bust during the third quarter of 2010 compared with 99 during Q3 2009.

Over the last quarter alone, the number of bar and pub companies going bust increased by 15% from 113 during Q2 2010 to 130 in Q3 2010.

Anthony Cork, Director at Wilkins Kennedy says: “Despite growing economic recovery, bar companies continue to collapse at an increasing rate.”

“As they were about to embark on the busy Christmas trading period, the most profitable time for this business, it is surprising that lenders are calling time. This lack of confidence from lenders is worrying news for the industry.”

“When well-established brands like Balls Brothers go under in the lead up to Christmas, alarm bells start ringing.”

Wilkins Kennedy says that bars and pubs have been hit hard by increasing tax burdens introduced over the last year.

Bars and pubs are also thought to have been hit by the recent snow.

Comments Anthony Cork: “Pubs and bars have had a tough time of it over the last year. Still reeling from the impact of the recession, they crumbled under ever increasing tax and legislative burdens which has left them vulnerable to a competitive threat from supermarkets.”

“Constantly faced with being undercut, bar operators are forced to swallow tax increases themselves or lose custom to the supermarkets.”

Wilkins Kennedy says that further legislative burdens will heap even more pain on pub and bar companies in the coming months as the Government's Police Reform and Social Responsibility Bill comes into force this month, imposing a £4,500 levy for bars and pubs that serve alcohol after midnight without a correct licence.

New laws will also allow residents who live outside the immediate vicinity of a pub, bar or club to challenge its opening hours. Current legislation only allows this right for direct neighbours of the establishment to challenge the pub or bars opening hours.

Anthony Cork says: “The Government seem to have forgotten pub operators in their desire to tackle binge drinking problems.”

“Banning the sale of alcohol below cost price would curb a great deal of binge-drinking, while sparing the pub and bar industry from further woe.”

Pub and Bar companies that went bust over the last 12 months

Balls Brothers – City bar chain operating 19 pubs and bars across the City and West End of London went bust at the end of November 2010.

Buddha Bar – London bar and restaurant owned by billionaire investor Simon Halabi went bust when Halabi was declared bankrupt over a loan owed to Kaupthing Singer & Friedlander, the UK division of the Icelandic bank.

The Maypole Group – East Anglia based pub and hotel company with six establishments was put into administration after owing debts of more than £8m.

Pubfolio – Wiltshire based pub company with 250 establishments across the UK went into administration after owing its banks in excess of £50m.

Faucet Inns Pub Co – pub and bar operator with more than 20 outlets across London and the South East went through a pre-pack administration process.

Gordon Ramsay’s pub ‘The Devonshire’ was forced to close in June 2010. It was opened in 2007 and despite pumping £5million into the business it still failed.