INFLATION, staff shortages and soaring energy prices are fuelling a rising number of liquidations in the pub and restaurant industry, an insolvency business has warned.

The number of insolvencies among pubs, bars and restaurants rose by 59 per cent to 2,156 in the 12 months to September this year, according to trade journal the Morning Advertiser.

And research by the Campaign for Real Ale (Camra) found 485 pubs closed in the first half of 2022, up 90 per cent on the same period the previous year.

The Bournemouth office of licensed insolvency practitioner Antony Batty says increases in energy prices are a significant factor in a sector already struggling with Covid debts, lack of staff, higher wage rates and rising interest rates.

Elaine Wilkins of Antony Batty in Bournemouth said: “We are seeing a number of liquidations as a result of inflation and a lack of staff hitting businesses which were already weak following the pandemic.

"Monthly energy bills going up in some cases from £2,000 to £7,000 (and more), for example, have been the final straw.

“Interestingly, an increasing number of pubs are being run through an operating company which is separate from the ownership of the lease, tenancy or freehold. As a result, some operators have been able to wind up the operation company yet retain the actual pub.

“Such operating companies are generally given a licence to run the pub business from the ‘landlord’ who may be the freeholder, leaseholder or tenant. The operating company employs staff, buys food & drink, pays business rates, contracts with energy suppliers and receives all trading income.

“On insolvency, the operating company’s only asserts are generally wet and dry stocks. Fixtures and fittings and goodwill are generally owned by the ‘landlord’. However, it is not uncommon for the same individuals to be both ‘landlords’ and directors of the operating company.

“The directors of such pub operating companies do not necessarily get away scot-free; they are restricted from being a director of another company with a similar trading name and must take great care to keep the different enterprises separate and at arms-length.

“If XYZ Op Co Limited trading as, say, the Queen Victoria pub goes into liquidation, section 216 of the Insolvency Act 1986 prohibits (with certain exceptions) the same directors from forming a New Op Co Limited which then trades as the Queen Victoria. It is clearly very difficult, and undesirable to change the name of a pub.”

Antony Batty said pubs and restaurants facing insolvency should also explore negotiating a “time to pay” arrangement with HMRC, seeking additional finance, or a company voluntary arrangement (CVA) offering creditors a structured repayment plan for a percentage of their debts. The move writes off part of a business’s debts and avoids liquidation.