Pay crisis closes 3,000 London bars and restaurants

London’s reputation as a party capital is under threat. Research from the Night Time Industries Association (NTIA) finds over 3,000 bars, restaurants, and pubs in the city have called last orders post-pandemic, as firms struggled to pay employees amid dwindling footfall.

In total, 3,011 businesses have shut down since March 2020 including popular venues like The Vurger Co., Heaven, and Marco Pierre White’s Mr. White restaurant.

The figures will ring alarm bells for industry leaders and business owners. Staffing costs have reached untenable levels for hospitality firms since COVID, which has squeezed profit margins for businesses grappling with diminished consumer spending.

At the start of this week, the national living wage rose to £11.44 per hour, raising questions about how the change will impact the UK hospitality sector and its estimated three million workers.

April 1 pay rise is no joke for hospitality

In a survey of 546 businesses at the end of last year, Startups found that a crippling pay crisis is impacting hospitality.

Almost one in five (19%) of firms reported they would not be able to meet employee pay expectations this year; the highest level of pessimism in any UK sector.

Law changes are contributing to woes. On April 1, the National Living Wage and National Minimum Wage rose. However, employer National Insurance contributions (NICs) stayed the same, meaning bosses now need to fork out more for both staff salaries and NICs.

Introduced on April Fool’s Day, the new rates were no joke to hospitality owners. Analysis by The Accountancy Partnership finds that hourly wage workers could now cost employers an additional £217 per month from this April, compared to the previous financial year.

Even the big names are struggling. Scottish brewery Brewdog faced criticism after it relinquished its status as a Real Living Wage employer for the first time since 2014.

National woes

The situation in the capital is emblematic of a wider national slump that has been threatening late night venues across the UK.

Adding to troubles is the global cost of living crisis, which has decimated hospitality profits. The issue is contributing to a generational decline in drinking as young people cut back on going out to save money.

509 pubs closed their doors for good in 2023 alone, according to data from the British Beer & Pub Association (BBPA). Those closures equated to a loss of more than 6,000 jobs.

London’s economy typically skews the national average. Accountancy firm EY has forecast stronger growth in the capital than for the rest of the UK in 2024, for example.

However, the NTIA figures demonstrate that even the Big Smoke is no longer immune to today’s harsh business landscape. Michael Kill, chief executive of the NTIA, says operating costs for bars and restaurants are up 30 to 40% from pre-COVID times.

‘There has been a lot of crowing about London doing well, but I hear a lot of businesses saying “I don’t know what figures you’re looking at, it really isn’t going well”,’ Kill reported.

Sobering outlook

Ahead of this week’s minimum wage rises, Kate Nicholls, chief executive of UKHospitality (UKH) had previously warned that some businesses may not survive the increases without government support.

Aid has dried up, too. March’s Spring Budget, which could have provided a Hail Mary for struggling SMEs, proved to be a glass half-empty.

Chancellor Jeremy Hunt offered no reduction to VAT and no extension to Small Business Rates Relief (SBRR) in England. Coupled with the closure of the support scheme in Wales, bricks-and-mortar property costs continue to skyrocket.

In a press release, Nicholls added: “Our sector firmly believes in paying people a good wage [but] we need healthy and profitable businesses to do that, supported by regulation.

“Governments across Britain have levers they can pull to help businesses. They can, and should, fix business rates, ease employment costs, and reduce VAT. I would urge them to pull these levers quickly.”