According to recent data from Deloitte Ireland, the insolvency rate within the hospitality sector has surged by 142% in the first quarter of 2024, relative to the same time the previous year. In the initial three months of this year, there have been 46 instances of insolvency within this sector, with cafes and restaurants accounting for 35 of these – a stark contrast to the 19 insolvencies observed in the January-March period of 2023. Furthermore, this represents a 44% rise from the numbers in the last quarter of the previous year.
Deloitte pinpoints the surge to several contributing factors, including heightened labour and energy prices, increasing insurance expenses, and the VAT rate reverting to 13.5% from September of the previous year. There is also an impending mandatory pension scheme due to start in September 2024 that Deloitte suggests will possibly contribute to ongoing stress in the industry, alongside the consequences of increased living costs impacting discretionary spending.
Deloitte’s latest insolvency and restructuring insights indicate corporate insolvencies across various sectors in the first quarter numbered 214, exhibiting a 47% annual increase. James Anderson, a turnaround and restructuring partner at Deloitte Ireland, comments on this alarming increase and its consequences on businesses.
In assessing the impact on employment within the hospitality sector, Anderson notes the role of the heightened insolvency rate. He shares that the fourth quarter of 2023 was the first time post-pandemic for the food and accommodation sector to exceed pre-Covid employment levels. He asserts that monitoring employment levels in the sector throughout 2024 will be a critical performance indicator.