The Rugby World Cup and greater consumer spending power thanks to falling food and petrol prices provided a much needed boost to UK bars and restaurants during the third quarter of the year.
According to Begbies Traynor’s latest Red Flag update, which monitors the health of UK companies, the number of restaurants and bars experiencing “significant” financial distress decreased by four per cent to 14,229 over the past three months.
Rugby fans going in search of big screens on which to watch the World Cup helped boost food and drink sales at pubs across the country, with recent Barclaycard figures showing a 11.6 per cent rise in spending at pubs in September.
However Begbies Traynor said the recent improvement masked the worrying fact that levels of financial distress in the sector are still 48 per cent higher than last year, with small to medium-sized firms making up 98 per cent of the industry’s struggling businesses.
The leisure and hospitality sector is one of the biggest private sector employers and has spoken out against the impact of introducing George Osborne’s new national living wage next year, with Costa Coffee owner Whitbread warning that it could lead to price rises.
Meanwhile increasing competition from supermarkets and chains such as Greggs trying to expand into the food to go market has also put pressure on restaurants.
Begbies Traynor partner Julie Palmer said: “The industry shouldn’t become complacent, believing that this momentum will continue, as the sector is still suffering from significantly higher levels of financial distress than it was at this stage last year. While most bars and restaurants can look forward to higher footfall during the festive period, the first quarter is a notoriously difficult period for the sector as consumers batten down the hatches after stretching their finances over Christmas.”