‘Worrying surge’ in number of UK businesses entering ‘critical’ financial distress, bars and restaurants among those struggling the most: Begbies Traynor has said its latest red flag report reveals a “worrying surge” in the number of businesses in the UK entering “critical” financial distress in the final quarter of 2024 – with bars and restaurants among those struggling the most. In the fourth quarter of 2024, critical financial distress rose by 50.2% to 46,853 companies. Of the 22 sectors covered, 21 saw a noticeable increase quarter-on-quarter in the number of businesses in critical financial distress. The growth in distress was particularly concerning in consumer facing sectors, with hotels and accommodation (+83.63%) and leisure and cultural activities (+76.46%) both increasing significantly. Bars and restaurants were the ninth most affected industry listed (1,756 companies). Companies in significant financial distress also rose by more than a fifth in the quarter versus the same period in 2023 (Q4 2023: 554,554), with each of the 22 sectors monitored experiencing an increase of more than 15% over the year. Bars and restaurants were the eighth most affected industry listed (17,134), with food and beverages tenth (6,633). Julie Palmer, partner at Begbies Traynor, said: “As we start a new calendar year, there is very little to be excited about. Across nearly every sector, there has been a unprecedent level of growth in the number of firms who are at serious risk of entering insolvency in the next 12 months. The fact that the distress is being felt across almost every corner of the economy highlights how difficult the outlook is for UK businesses right now. After a disappointing Christmas, consumer-facing industries, in particular, are feeling the strain, with rising operational costs and higher wages adding to an already difficult situation. With many such businesses already operating on thin margins, I fear the current situation will undoubtedly push some over the edge. In the absence of a reduced tax burden and a strong economic recovery, I expect the number of insolvencies to continue to rise in 2025 as firms struggle to cope with a perfect storm of rising costs, financial instability and fluctuating market conditions.”

 

Government contracts help hotel group to record turnover and profit: Government contracts helped hotel group Princeotels to record turnover and profit in the year ending 31 December 2023. The group was formed in September 2021 when, as part of a restructure, Princeotels became the parent company to Prince Hotels, which operates three hotels in the Midlands, and Prince Hotels GmbH, which operates a single hotel in Frankfurt, Germany. Led by Prince Nasser, its UK sites are the Quality Hotels in Leeds and Birmingham and Stephensons Hotel in Birmingham. Turnover for the period was £13,226,023 compared with £7,990,088 the previous year. Of the 2023 figure, turnover from UK operations was up to £11,673,707 (2022: £6,653,921) while in Germany revenue increased to £1,552,316 (2022: £1,336,166). Pre-tax profit jumped to £8,544,648 from £1,569,672 the year before as the group slashed administrative expenses by more than £2.5m. Group Ebitda was flat at £2m, while dividends of £608,434 were paid (2022: £332,568). “As for many businesses of our size, the business environment in which we operate continues to be challenging,” Nasser said in his statement accompanying the accounts. “The hotel industry, both in the UK and Germany, is highly competitive and margins continue to be challenged. In the UK, the introduction of government contracts in two of the hotels has been the main factor behind the growth in turnover.” The company employs around 100 staff.

 

Casino operator in discussions with landlords to agree repayment plan to clear rent arrears as trading ‘remains challenging’: Rainbow Casinos is in discussions with landlords to agree a repayment plan to clear rent arrears as trading “remains challenging”. It comes as the company, which operates sites in Birmingham and Bristol, reported turnover fell to £11,707,117 for the year ending 27 August 2023 compared with £13,226,643 the previous year after the group sold its Aberdeen and Cardiff sites during the period. Adjusted Ebitda was down to a loss of £650,058 compared with a profit of £193,291 the year before. Pre-tax losses rose to £6,147,014 from £1,565,258 the previous year following exceptional costs of £4,307,745. In their report accompanying the accounts, the directors stated: “The after-effects of covid and the impact of safer gaming legislation, as well as the general economic environment and changes in consumer behaviour, continue to challenge the company. The sale of the Aberdeen site was completed in May 2023. A provision for impairment of £257,250 was made in the prior period, with a further small loss on sale of £30,000 made in the current period. This decision enabled the management team to focus on its two remaining operations, Birmingham and Bristol. While the Birmingham site remains profitable, the Bristol site is currently not able to generate sufficient revenue to cover its costs, which include rent costs under fixed term leases that end in 2031. As a result, an exceptional onerous lease provision of £3,656,000 has been reported in the current financial period. The Bristol results have also been adversely affected by additional back rent charges of £416,000 being agreed post-year end, which has been accrued. Additional cash was also generated during the period from the sale and leaseback of the Birmingham premises, resulting in a cash injection of £1.5m, although an exceptional loss on sale of £335,000 was made. The directors are currently in discussions with landlords to agree a fundable repayment plan to clear the rent arrears.” The company, which employs around 170 staff, did not receive any government grants (2022: £3,150). No dividend was paid (2022: nil).