The hospitality sector is no stranger to challenges – so don’t miss our top strategies to turn your business around.
From seasonal cash flow swings to rising operating costs, the landscape for hotels, restaurants, and event venues has always been competitive and high-risk. But recent years have brought unprecedented pressures - post-pandemic recovery, inflation, staffing shortages, and supply chain disruptions have created the perfect storm for many.
It’s no wonder that hospitality insolvencies are on the rise. In fact, hospitality insolvencies in the UK have increased 21% month-on-month since the end of 2024.
If your hospitality business is struggling financially, you're not alone. But here’s the good news: insolvency doesn’t have to mean the end. With the right support and a proactive approach, there are strategies that can help stabilise your business - or, if necessary, wind it down in a responsible way.
In this blog, we’ll explore the causes of financial distress in the hospitality sector, the warning signs to look out for, and the strategies available to hospitality businesses facing insolvency.
Why Hospitality Businesses Are Particularly Vulnerable
It’s no secret that hospitality is a high-cost, high-turnover industry. From rent and rates to wages, utilities, stock, and marketing, even a modest downturn in trade can put immense pressure on your cash flow.
Add external factors such as rising energy and food prices, minimum wage increases, seasonal fluctuations, high levels of staff turnover, and post-Brexit labour shortages and it’s no surprise that hospitality insolvencies have increased in recent years.
The industry’s exposure to consumer confidence and discretionary spending makes it especially susceptible to economic shifts. Hotels and restaurants also tend to carry higher levels of fixed costs - meaning there’s less room to manoeuvre when income dips.
Key Warning Signs of Insolvency in Hospitality
If you're unsure whether your business is at risk, these are some key indicators to watch for:
- Difficulty paying staff wages or suppliers on time
- Overdue rent, utility bills, or business rates
- Repeated use of short-term finance to cover everyday costs
- Growing HMRC arrears (VAT, PAYE, Corporation Tax)
- Falling customer numbers or booking cancellations
- Negative cash flow for several months in a row
Recognising these signs early can mean the difference between recovery and closure. That’s why at McAlister & Co, we always stress the importance of early action - it opens up more options and improves the chances of a successful outcome.
Tailored Strategies for Hospitality Insolvencies
If your hospitality business is under pressure, the good news is there are several strategies available - each designed to protect viable parts of your operation, satisfy creditors, and give you breathing space to make informed decisions. Here’s how we support hotels, restaurants, and event venues through the process:
1. Rescue and Turnaround Planning
If the business is fundamentally viable, we can help you put together a practical recovery plan. This might involve renegotiating supplier contracts or lease terms, reviewing your pricing structure or menu profitability, introducing tighter cost controls or restructuring staffing, or seeking alternative finance to boost working capital.
Our team can help assess the viability of your business model and identify pressure points - creating a plan that focuses on stabilisation and recovery.
2. Time to Pay Arrangements with HMRC
Many hospitality businesses fall behind on tax payments due to seasonal cash flow issues or unexpected costs. A Time to Pay (TTP) arrangement allows you to repay HMRC arrears in instalments, typically over 6–12 months. This can relieve immediate pressure and help avoid enforcement action.
If you need help organising a TTP arrangement, we can support you in preparing your case and negotiating a realistic, affordable plan with HMRC.
3. Company Voluntary Arrangements (CVAs)
A company voluntary arrangement is a formal agreement with creditors whereby you pay back a portion of your debts over time, usually over three to five years. This option allows you to continue trading while giving your business the breathing space it needs to return to profitability.
CVAs are especially suitable for hospitality businesses with strong fundamentals - perhaps a loyal customer base or prime location - but who need time to reduce overheads or restructure debts.
4. Administration or Pre-pack Sales
If creditor pressure is severe, or if your business cannot meet its financial obligations, administration can provide immediate legal protection from legal action and give time to assess your next steps.
In some cases, a pre-pack administration may be suitable. This allows the business and its assets to be sold to a new company - often controlled by the same directors - allowing you to preserve jobs and key contracts while starting afresh.
5. Creditors’ Voluntary Liquidation (CVL)
If your hospitality business is no longer viable, a creditors’ voluntary liquidation allows you to close the company in an orderly, professional manner. A licensed insolvency practitioner will handle creditor communication, asset realisation, and any necessary reporting to the Insolvency Service.
While closing a business is never easy, a CVL can help you move forward without the weight of legacy debt or unresolved liabilities.
Supporting You Through the Process
At McAlister & Co, we understand how personal a hospitality business can be. Whether you’re running a family-owned restaurant, an independent hotel, or a thriving event venue, it’s more than just numbers - it’s your livelihood, your passion, and your people.
That’s why we take a compassionate, solutions-focused approach. Our team of licensed insolvency practitioners will guide you through every step of the process - exploring your options, protecting your interests, and supporting you with clear, honest advice.
If you’re concerned about rising costs, creditor pressure, or cash flow issues, don’t wait until it’s too late. Talk to our expert team today to explore your options around hospitality insolvencies and take control of your future. Book your free consultation today to learn more about how we can help.