Pryzm nightclub closure just tip of iceberg of challenges for Yorkshire's hospitality sector: Oliver Reece

The sector was arguably hit longest and hardest throughout the pandemic, and many firms had to take Covid loans to survive.

The squeeze on consumer spending in 2023, due to rising interest rates and the cost of living crisis, has only placed more pressure on businesses.

Indeed, the Stonegate Pub Company, which operates 17 venues in Leeds, is seeking to refinance £2.5 billion of debt following its acquisition by TDR Capital.

Our business newsletter will give you the inside track

The hospitality sector is a significant part of the UK's economy. It employs over three million people and creates over £130 billion in economic activity.

Restaurants and bars are also essential parts of the communities they serve.

The UK economy will likely remain constrained over the coming months, with growth of around 0.5 per cent through 2024.

In this environment, hospitality businesses should take urgent action to ensure they have the financial resources to survive and, wherever possible, thrive.

Renegotiating with existing lenders to provide more headroom, raising new funding or refinancing existing debt can give a business the flexibility it needs to navigate the headwinds of a tough economy.

With many potential funders outside of the traditional banks, which may provide more attractive solutions, teaming up with experienced partners makes sense, particularly as management teams are experts at running hospitality venues rather than raising or re-negotiating finance.

Before seeking funding, understanding how to approach lenders, and which solution is best for you is essential. Transparency and honesty are critical to an ultimately successful outcome.

The process begins by understanding the routes open to a particular business, such as business loans, asset finance, or debt restructuring. It's important to take advice and choose the best path forward for the company.

Choosing an advisory partner with the right experience is critical. Understanding the lender's appetite for risk and priorities will ensure a greater success rate and secure the best deal for the business.

An experienced advisor can research funding options, approach lenders, negotiate terms and streamline the process, allowing management teams to focus on running the business.

Opportunities are out there. Online continues to grow, and home delivery can provide many bars and restaurants with valuable additional revenue streams. Indeed, Deliveroo announced it saw revenues grow by 4 per cent in the final quarter of 2023. While the operators of Boom Battle Bar, which offers axe throwing alongside food and drink, saw revenues leap 228 per cent last year.

Many great businesses have built up debt over the recent shocks to the economy and are struggling with short-term cash flow problems. They require immediate support to trade through this period due to debts and HMRC arrears.

These companies are an essential part of Yorkshire's economy. If they're to generate employment and improve their competitiveness, they must seek advice from the world-class professionals we have in the region.

Oliver Reece is managing director of Fresh Thinking Advisory