Press Releases

31 August 2011

Number of bars, pubs and clubs folding increases 9.4% in the last quarter

• 116 bar and pub companies went bust in last quarter alone
• Royal wedding fails to counteract pressure on consumer spending

The number of bar, pub and night club businesses going bust rose by 9.4% in the last quarter, according to research by Top 22 Accountancy firm Wilkins Kennedy.

116 bar, pub and night club companies became insolvent in the last quarter alone (Q2 2011), an up from the 106 over the previous quarter (Q1 2011). A total of 540 have become insolvent over the last 12 months.

Wilkins Kennedy says weakening consumer spending and tax rises are taking their toll on the industry.

Anthony Cork, Partner, of Wilkins Kennedy comments: “The second quarter of 2011 has been particularly tough for bars, pubs and night clubs and the death toll keeps rising.”

“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.”

According to the ONS, the number of people unemployed in the UK rose by 38,000 to 2.49 million in the three months to June.

Says Anthony Cork: “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.”

Wilkins Kennedy says that the rise in alcohol duty announced in April’s budget has contributed to the erosion of profit margins of bars, pubs and night clubs.

Alcohol duty rates rose 2% above the Retail Price Index in March 2011, adding 4 pence to the price of a pint of beer, 15 pence to the price of a bottle of wine and 54 pence to the price of a bottle of spirits.

Anthony Corks explains: “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.”

Wilkins Kennedy says that bars and pubs continue to suffer intense competition from large supermarkets which are able to sell alcohol at rock-bottom prices, encouraging people to drink more at home.

Adds Anthony Corks: “Supermarkets are continuing to increase the lines of niche and artisan drinks which is causing problems for some mid-market pubs and bars.”

Pub and Bar companies that have experienced difficulty over the last 12 months

• Luminar entertainment - Currently in the middle of debt talks with its banks. Trades 76 of the largest nightclubs in the UK, The venues are divided into various brands, of which the main ones are Oceana, Liquid and Lava & Ignite.

• Castle Inns – Operator of around a dozen bars and nightclubs in Scotland went into administration in July 2011.

• Principle Leisure Group - The Tyne & Wear-based operator, with more than 9 bars and restaurants, is one of the UK’s leading leisure firms and was placed on the market after falling into administration in April 2011.

• Cougar Leisure – Entered administration in Jan 2011 and aimed to sell off its remaining six pubs and bars spread across the North of England. Cougar Leisure put 11 pubs and bars on the market in June 2010.

• 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.

ENDS

Press enquiries:

Anthony Cork
Partner
Wilkins Kennedy
Tel: 020 7403 1877
Mobile: 078 8060 1962

Nick Mattison or Anokhi Madhavji
Mattison Public Relations
Tel: 020 7645 3636
Mob: 07931 685 714