With the insolvency statistics for the last quarter of 2023 giving more cause for concern, which sector do we expect is going to have the toughest 2024?
The construction industry is seen as a consistent contender with 4,371 companies facing insolvency in 2023, we would expect this to continue into 2024 influenced by higher interest rates impacting construction businesses. However, the hospitality sector following closely on the heels of the pandemic, has probably experienced the most immediate impact of combined borrowing, energy and stock costs and restrained consumer spending, which are squeezing both ends of the business, and contributing to the 3,727 cases reported in the final quarter of 2023. This is around 15% of all UK businesses.
The hospitality industry was one of the hardest hit industries in 2023 (coming in third), with numbers reaching particularly concerning levels; there was a 37% increase on 2022 levels which was the most rapid upward trend of any major industry sector in the past 12 months.
In April 2024, we will see the introduction of the largest ever single increase to the national living wage; for those aged 21 and over there is an increase of 9.8% (increasing by £1.02 to £11.44 per hour), and for those between 18-20 there is an increase of 14.8% (increasing by £1.11 to £8.60 per hour). This is bound to have its greatest impact on smaller, independent businesses, whilst larger firms may be fuelling the problem of staff recruitment and retention for the industry. As one example, Marks and Spencer have announced their biggest investment in staff pay with an increase in minimum rate up to £12 per hour (outside of London) and £13.15 in the capital.
Charles Brook, Director said “Although the hospitality industry does not have the highest number of insolvencies it has certainly been the most affected in the last 12 months. 2024 will be another tough year for the sector but, if inflation begins to ease in the latter half of 2024, restoration of consumer confidence could support some improvement.”
