How many hospitality companies go insolvent each year in the UK?

In the 12 months to June 2026, 3,523 hospitality companies (SIC Section I: accommodation and food service activities) entered a formal insolvency procedure, according to Insolvency Service record-level data. Full-year 2025 recorded 3,652 insolvencies, up from 1,678 in 2016, a rise of 117.6% over the decade. See the UK Hospitality Insolvency Index for the full monthly series.

Is hospitality really the hardest sector to survive in?

It depends which measure you mean. If you mean 'do hospitality businesses that start up fail faster than businesses in other sectors,' the answer is no: ONS Business Demography puts 5-year survival for the 2019 hospitality cohort at 38.1%, against 38.4% across all industries, essentially the same. If you mean 'does hospitality generate more insolvency events, more often, across its whole stock of trading companies,' the answer is yes: the insolvency count has more than doubled since 2016 and hospitality consistently ranks among the highest-insolvency sectors in Insolvency Service statistics.

What is the difference between a survival rate and an insolvency rate?

A survival rate tracks a single birth cohort (all companies incorporated in one year) and asks what share are still active one, two, three, four and five years later. An insolvency count is an annual tally of formal insolvency events (CVL, compulsory liquidation, administration, CVA) across the entire population of trading companies, regardless of when they were formed. A sector can have an average survival rate and still post a high, rising annual insolvency count if its total stock of companies is large and margins are persistently thin.

What is a Creditors Voluntary Liquidation (CVL) and why does hospitality see so many?

A CVL is a director-initiated wind-up: the directors conclude the company cannot pay its debts and pass a resolution to liquidate, appointing a licensed insolvency practitioner to realise assets and pay creditors. It is voluntary in the sense that directors choose to act before creditors force the issue through the courts. In the latest settled month in the index, 209 of 252 hospitality insolvencies (83%) were CVLs, reflecting a sector where operators tend to recognise insolvency and act, rather than being forced into compulsory liquidation.

When does a hospitality company become insolvent, technically?

A company is insolvent under the Insolvency Act 1986 if it cannot pay its debts as they fall due (the cash flow test) or its liabilities exceed its assets (the balance sheet test). Hospitality businesses typically hit the cash flow test first: rent, payroll, supplier accounts and business rates are due on fixed dates regardless of how trade is running, so a bad month or a bad quarter can tip a company into the cash flow test well before the balance sheet looks obviously distressed.

What happens if a director keeps trading after the company is insolvent?

Directors owe duties under the Companies Act 2006 and, once insolvency is likely, under the Insolvency Act 1986. If a director continues trading and takes on further credit knowing (or where they ought to have known) there was no reasonable prospect of avoiding insolvent liquidation, they risk a wrongful trading finding, which can make them personally liable for company debts incurred after that point. Directors should take advice as soon as cash flow first tightens materially, not once a winding-up petition or CCJ arrives.

Why do hospitality margins stay so thin?

Food and drink cost inflation, the National Living Wage and 15% employer National Insurance on earnings above the £5,000 secondary threshold, high energy costs for kitchens and refrigeration, and business rates all sit largely outside an operator's control and do not flex down when trade slows. Rent and payroll rotas are fixed costs that are due on the same dates whether covers are up or down. That combination of thin, externally-driven margins and fixed cost commitments is the structural reason hospitality's insolvency count runs consistently higher than most other UK sectors.

Where does the insolvency and survival data in this article come from?

Insolvency counts are drawn from the Insolvency Service's Company Insolvency Statistics record-level data (Open Government Licence v3.0), covering England, Wales and Scotland, updated monthly. Survival rates are drawn from the Office for National Statistics' Business Demography release, Table 4.2 (Open Government Licence v3.0), which tracks cohorts of newly born enterprises by broad industry group for up to five years. Both are compiled and cross-checked in the UK Hospitality Insolvency Index , last verified 23 July 2026.

Why Hospitality Firms Fail: UK Insolvency Data Explained

Hospitality posts one of the highest company insolvency counts of any UK sector, and the trend has been getting worse, not better: 3,523 company insolvencies in the 12 months to June 2026, against 1,678 for the whole of 2016.¹ That is not a story about hospitality businesses being unusually bad at surviving their early years; ONS survival data puts the sector close to the all-industry average.² It is a story about volume: thin, externally-driven margins meeting fixed costs that do not flex down when trade drops, repeated across a large stock of trading companies, year after year. This article sets out what the data actually shows, why the two measures (survival and insolvency) tell different stories, and what a director should do before cash flow becomes a legal problem.

The headline numbers

Company insolvencies under SIC Section I (Accommodation and food service activities, covering restaurants, cafes, takeaways, pubs, bars, hotels and other accommodation) totalled 3,523 in the 12 months to June 2026.¹ Section I is a clean, whole-section match for the hospitality sector in the Insolvency Service's own classification, so this figure is not an estimate pulled out of a broader "services" or "consumer-facing" aggregate; it is the section-level count as published.

The decade view is starker. Full-year hospitality company insolvencies rose from 1,678 in 2016 to 3,652 in 2025, an increase of 117.6%.¹ The annual count has more than doubled inside ten years, and the shape of that rise matters as much as its size: insolvencies climbed steadily through 2017 to 2019 (already up from the 2016 base before the pandemic), fell sharply during the 2020 to 2021 lockdown and support-scheme period, then rose past pre-pandemic levels from 2022 onward as furlough, business rates relief and bounce-back loan repayment holidays were withdrawn while energy and food costs spiked. Monthly insolvencies peaked at 408 in August 2023, close to three times the roughly 140-a-month pace seen in 2016.¹

The most recent settled month in the index recorded 252 hospitality company insolvencies, of which 209 were Creditors Voluntary Liquidations (CVLs), the director-led route rather than a court-forced compulsory liquidation.¹ That split is consistent across the whole series: CVLs have accounted for the large majority of hospitality insolvency events throughout the 2016 to 2026 period, which points to a sector where operators, once they recognise the position, tend to act rather than wait to be wound up by a creditor. The full monthly and annual series, broken down by procedure type (CVL, compulsory liquidation, administration, administration converting to CVL, CVA, receivership and moratorium), is published at the UK Hospitality Insolvency Index, sourced from Insolvency Service record-level data under the Open Government Licence v3.0.

Two different questions, two different answers

It is easy to conflate "hospitality companies fail a lot" with "a hospitality company you start today is unusually likely to fail." These are different questions, measured in different ways, and the data gives different answers to each.

Question 1: does a new hospitality business survive its first five years?

ONS Business Demography tracks each year's newly incorporated enterprises (a "birth cohort") and reports what share are still active one, two, three, four and five years later, by broad industry group.² For the 2019 cohort, the most recent year with a full 5-year observation window, 38.1% of hospitality (accommodation and food service) enterprises born that year were still active five years on. The all-industry average for the same cohort was 38.4%.²

Those two figures are, for practical purposes, the same. Hospitality is not an outlier on survival: a hospitality company started in 2019 had almost exactly the same odds of reaching its fifth birthday as a company started that year in any other sector. The earlier survival years tell a similar story: 1-year survival was 94.2% for hospitality against 94.6% all-industry; 2-year survival was 76.8% against 74.7% (hospitality slightly ahead); 3-year survival was 60.7% against 55.9% (hospitality ahead again); 4-year survival was 47.9% against 45.0% (hospitality ahead). On the ONS birth-cohort measure, hospitality does not stand out as a harder sector to survive in. If anything, the 2 to 4 year figures for the 2019 cohort run marginally above the all-industry average.

Question 2: how many hospitality companies go insolvent in a given year?

This is where the sector genuinely does stand apart, and it is a different calculation entirely. An insolvency count is not tied to a birth cohort; it is an annual tally of formal insolvency events across the entire existing stock of trading hospitality companies, whatever year each one happened to be incorporated. A company formed in 2008 that finally folds in 2024 counts in the 2024 insolvency total, not the 2008 cohort's survival curve.

Hospitality carries a large population of trading companies (tens of thousands of restaurants, pubs, cafes, takeaways and hotels operate as limited companies at any given time), and a persistently high share of that population crosses into formal insolvency each year, regardless of how old the company is. That is why the sector can show an unremarkable birth-cohort survival rate and, at the same time, a company insolvency count that has more than doubled in a decade and consistently ranks among the highest of any UK sector in Insolvency Service statistics. The two measures are not contradictory; they are answering different questions. Survival asks "of the companies born in one year, how many are still around." The insolvency count asks "across the whole stock, how many formal failures happen this year." Hospitality's problem sits almost entirely in the second measure, not the first.

Why the insolvency rate stays high: thin margins meet fixed costs

The structural reason hospitality's insolvency count runs high, and has been rising, is straightforward and largely outside any individual operator's control:

Margins are thin and externally squeezed. Food and drink cost inflation moves with global commodity and energy markets, not with a venue's own pricing power. Gross profit percentage in hospitality typically runs tighter than in most other trading sectors, leaving little buffer when input costs move against the business. See gross profit and menu pricing for how that margin is actually built up, dish by dish.
Labour costs have risen on a fixed schedule. The National Living Wage and employer National Insurance (15% on earnings above the £5,000 secondary threshold from April 2025) apply on statutory dates regardless of how trade is performing in any given month. A rota built around a busy summer does not shrink automatically in a quiet January.
Rent, rates and finance costs are fixed. Lease payments, business rates and loan or lease finance repayments fall due on the same dates whether covers are up or down. Hospitality cannot flex its largest overheads down quickly in response to a bad month, unlike, say, a stock-light services business that can cut discretionary spend almost immediately.
Cash flow is the trigger, not the balance sheet. A company becomes insolvent under the Insolvency Act 1986 if it cannot pay its debts as they fall due (the cash flow test) or its liabilities exceed its assets (the balance sheet test). Hospitality companies typically hit the cash flow test first: a bad month can leave a venue unable to meet payroll, rent or a supplier account well before the balance sheet looks obviously distressed. Stock-heavy operators should also see why accruals accounting usually gives a more accurate cash and profit picture than cash basis once stock is in the mix.
The post-support-scheme unwind. Furlough, business rates relief and bounce-back loan repayment holidays cushioned the sector through 2020 and 2021, which is visible in the index as a dip in both CVLs and compulsory liquidations. As those measures were withdrawn from 2022 onward, insolvencies rose past pre-pandemic levels and kept climbing into the 2023 peak.

None of this means an individual, well-run venue is destined to fail. It means the sector-wide baseline risk is genuinely higher than most other trading sectors, which is exactly why disciplined management accounts, a rolling cash flow forecast and an early-warning routine matter more here than in a business with fatter margins and more flexible costs.

Director duties: when to act, and what happens if you do not

Company directors owe duties under the Companies Act 2006 to promote the success of the company for the benefit of its members. Once insolvency becomes likely, that duty is overridden by a duty under the Insolvency Act 1986 to act in the interests of creditors as a whole, not shareholders. This shift happens well before a winding-up petition lands on the doormat: it applies from the point a director knew, or ought reasonably to have concluded, that there was no reasonable prospect of the company avoiding insolvent liquidation.

Two risks follow directly from this:

Wrongful trading. If a director continues trading, and in particular continues to take on credit from suppliers or run up further liabilities, after that point, they can be found personally liable to contribute to the company's assets for the loss caused. This liability attaches to the individual director, not just the company, and survives the company's own liquidation.
Loss of the CVL route on the director's own terms. Acting early, while a Creditors Voluntary Liquidation is still a choice rather than a last resort, generally produces a better outcome for creditors and a cleaner position for the director than waiting for a creditor to force a compulsory liquidation through the courts. The data bears this out: the large majority of hospitality insolvencies in the index are CVLs, not compulsory liquidations, which suggests that most operators in this position do act before being forced to.

The practical trigger for taking advice is not a legal test; it is a cash flow signal. If a venue is missing supplier payment terms, drawing on an overdraft to cover payroll, negotiating time-to-pay with HMRC, or relying on a director's loan to plug a recurring gap rather than a one-off, that is the point to get proper advice, well before any creditor takes formal action. A rolling 13-week cash flow forecast, reviewed monthly against a management-accounts P&L, is the minimum discipline for spotting the trend early enough to have real options: renegotiating terms, restructuring costs, or, where trading genuinely cannot be turned around, choosing a voluntary route on the company's own timetable rather than a creditor's.

What this means for your venue

The data supports a specific, narrow conclusion, not a broad one. It does not show that hospitality companies are unusually likely to fail in their first few years; the ONS birth-cohort figures say they are not. It does show that, across the whole stock of trading hospitality companies, the annual rate of formal insolvency is high and has more than doubled since 2016, driven by margins that are thin for structural reasons outside any single operator's control, sitting against costs that are fixed and due on statutory or contractual dates regardless of trade. That combination is what makes hospitality, sector-wide, one of the highest-insolvency trading sectors in the UK, and it is also exactly the combination that management accounts, cash flow forecasting and early director action are designed to manage. The hospitality openings and closures index tracks the company-formation side of the same picture, Companies House registrations and dissolutions by SIC 55/56 code, for context on how much of the sector's churn is genuinely new entrants versus existing operators exiting.

Sources

The Insolvency Service, Company Insolvency Statistics, record-level data (Open Government Licence v3.0), cross-tabulated by SIC Section I in the UK Hospitality Insolvency Index, retrieved 23 July 2026.
Office for National Statistics, Business Demography, UK, Table 4.2 (Survival by broad industry group) (Open Government Licence v3.0), retrieved 23 July 2026.

Why Hospitality Is the Hardest UK Sector to Keep a Company Alive