Do you own a hospitality business in the UK? Has your business been experiencing financial difficulties, or are you ready to move on to a different venture? In this blog, we’re providing more information on hospitality business liquidation. It’s our complete guide for restaurant and pub owners.
In 2025, hospitality businesses faced significant financial strain, some of which resulted from the pandemic, supply chain disruptions, and increased operational costs. There is evidence that things have improved, but monthly fluctuations persist.
The industry has experienced high insolvency rates, with an average of two hospitality businesses closing each day during the first half of 2025.
Trends similar to those in previous years have been noted: busier periods over the summer months, leading to fewer insolvencies during this period. The hospitality sector remains significantly smaller than pre-pandemic levels, with estimates suggesting it is still over 10% below its March 2020 size.
What factors are contributing to higher insolvency rates in the hospitality sector?
Businesses are facing rising operational costs, which are driving up prices and forcing them to charge more, which can push customers away. Increases introduced this year have included higher wages, energy bills and food inflation.
With rising costs for businesses and consumers, people can be more wary about how they are spending their money. This means that more money is spent on essentials rather than nice-to-have or luxury items. Consumer confidence has also been lower in 2025.
Most businesses are also facing higher business rates and increased tax liabilities, which require more careful planning.
It’s no secret that businesses have struggled more over the last few years. With that comes the increased risk of company debts. Many small businesses are now facing the consequences of increased unpaid debt as they struggle to raise their own prices.
During the last 12 months, business directors and their teams have had to remain resilient to continue succeeding in the hospitality industry.
Closing a hotel or hospitality business
With so many elements stacked against hospitality businesses, you definitely won’t be the only one struggling. There are many reasons why a company may close, including financial issues, moving on to a new venture or retiring.
It’s important that you state your reasoning, as it will impact the method you can use for a hospitality business liquidation.
If you have outstanding debts that you cannot afford to pay on time, then your business is insolvent. You will likely need to use a formal insolvency process called a creditor’s voluntary liquidation (CVL). If you have no outstanding debts or you can afford to pay debts on time, you can use a member’s voluntary liquidation. Businesses that take no action may be forced into compulsory liquidation.
Businesses that have not traded for three months and have no outstanding debts may be eligible to use a strike-off method, the cheapest way to close a company.
Once your company is closed, it will be removed from the Companies House register.
What should I do?
Before you begin thinking too much about closing your business, it’s worth assessing whether there are any alternatives that may be more appropriate. We always recommend speaking directly with a professional and asking for personalised advice on your specific situation.
Explore your options
Of course, you can close your company, but there may be an option to rescue it. Some people find that company voluntary arrangements or administrations work for them. Always seek advice before using these methods. A restructuring plan may not be suitable for companies facing financial difficulties that see no hope of recovery.
Speak to creditors
Many business directors overlook the power of open communication with creditors. It’s normal to feel worried, but by being open, you may alleviate some of the stress. Some creditors may be willing to extend the payment deadline until you are in a better position to pay the debts.
HMRC may offer some business directors a ‘Time to Pay’ arrangement. However, you will need to contact them early and be honest. Negotiating extended payment terms may not be suitable for everyone, so make sure you seek professional advice.
Consider a pre-pack administration
Some directors choose to use a pre-pack process, which involves selling the company’s assets to a new company, often run by the same directors following administration. You should always seek advice about this and be careful about selling assets. All assets must be independently valued and sold at their market value.
You may need to appoint a licensed insolvency practitioner to assist with the process of closing or rescuing your company. We recommend that you speak to multiple practitioners to ensure that they provide the services you need at an appropriate price. You also need to ensure they have checked for personal guarantees and overdrawn loan accounts.
A licensed insolvency practitioner should assess your company’s affairs in the hospitality industry and identify the causes of financial challenges. A creditors’ voluntary liquidation is the most commonly used liquidation process and usually reflects positively on the director. It means some unsecured creditors may not be paid, just as shareholders may not receive any money. Read our blog on the liquidation payment hierarchy.
Your expert insolvency practitioner should be responsible for realising assets and ensuring that your business meets eligibility criteria for all processes. After asset realisation, they will begin distributing proceeds to secured creditors and unsecured creditors.
What else to consider in the hospitality sector
As a hospitality business, you may have employees and premises. Employees are likely to be made redundant, and they will need to claim their payment if you cannot afford to sort it. Your premises license should also be transferred to the liquidator within 28 days; otherwise, you may face issues.
As the company director, you may be eligible for director redundancy pay. Many hospitality businesses in financial distress struggle to see how they will fund a liquidation process given reduced cash flow, but redundancy pay can cover the costs if necessary.
We hope this blog has been helpful regarding hospitality business liquidation. Are you looking for business rescue or closure advice for your hospitality company? Our experts are ready to help you with professional and confidential advice. Contact us today.
Justin Barker
I’m Justin Barker, the Managing Director at 1st Business Rescue. I have over 25 years of experience providing insolvency advice to business owners.
I understand how challenging it can be when dealing with financial difficulties within your business. It’s easy to ignore the problem and hope that it disappears, but this is often the worst thing you can do. Our dedicated team is here to provide honest, valuable advice to help UK directors deal with their personal situations in the most appropriate way.
No case or circumstance is the same, but I can guarantee that I am there to give you the best advice.
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