PwC casts doubt on on-trade recovery

Pub insolvencies may be down by a third from their recession peak, but a fresh wave of restructuring and insolvency remains a threat, according to a new report by PricewaterhouseCoopers.

Although the rate of failing pubs in the second quarter of 2010 was 32% lower than the peak at the end of 2009, when PwC recorded 88 collapsed businesses, the level remains nearly 10% up on just two years ago.

Fears of further government spending cuts, the potential for interest rate hikes and the associated reduction in consumers’ discretionary spend continue to create uncertainty across the industry.

Current estimates from economic experts suggest that interest rates could go up to as much as 2.5% by the end of this year.

David Chubb, partner at PwC, warned: “The insolvency stats do not fully illustrate the extent of the problems in the sector as much underlying restructuring activity continues. Even without entering insolvency creditors may still experience pain."

Meanwhile the restaurant scene has seen insolvency levels for Q2 2010 increase by 5% on the first three months of this year, with PwC describing the sector’s ongoing reliance on discounts as “unsustainable”.

Chubb noted that, “While restaurant closures have slowed, both regional and London eateries are still very reliant on promotions and as a result profit margins remain under pressure.

"Consumers are likely to demand even greater value for money in the coming months as the impact of higher taxes and interest rates take hold.”

Gabriel Savage, 13.07.2010