'Tier 3' risks permanent closure for one in five northern bars and restaurants

Tier 3 lockdowns across the north of England risk putting 3,754 bars and restaurants out of business, according to data from insolvency fintech Red Flag Alert.

Analysis by the insolvency score experts predicts that a blanket Tier 3 across the North of England would spell the end for 22% of the region’s bars and restaurants.

These businesses are fearing closure or very limited trading under looming Tier 3 COVID restrictions.

Liverpool became the first UK city to be classed as ‘Very High Risk’ earlier this week, and it has been announced today (Friday) that Lancashire will also be placed into the very high alert level Tier 3.

Greater Manchester continues to fight the Government’s plans to move it into the highest level of new local lockdown restrictions.

The latest Red Flag Alert data shows that at the end of June 2020, the number of Northern England bars and restaurants in significant financial distress had increased by 4.5% since the national lockdown in March, 2020.

These are businesses with either County Court Judgements (CCJs) filed against them for missed payments or which are showing a consistent deterioration in financial performance including working capital, financial liabilities and losses.

The 3,754 struggling bars and restaurants in Northern England account for 22.2% of the region’s 16,861 venues in this hard-hit sector.

Nationally, the sector is already facing losses of £32.5million from invoices going unpaid because of failing companies going bust.

This level of bad debt has risen by 37% from £23.7million at the end of June, 2019.

Mark Halstead, managing director of Red Flag Alert, said: “Unfortunately, the new local furlough scheme and cash grants will not be enough for many of the struggling bars and restaurants in the North of England to survive a Tier 3 lockdown.

"They simply don’t have the cashflow and financial health to sustain closing their doors again so soon after the easing of the national lockdown.

“Many of these bars and restaurants are operating on the breadline and the highest level of the new lockdown system will prove the final nail in the coffin.

"There’s then the concern of how their insolvencies will affect the rest of the supply chain they owe money to.

"Closing bars and restaurants runs much deeper than the economic woe affecting the premises you see on high streets.

"It’ll end up costing suppliers’ tens of millions of pounds in write-offs over the coming months, which risks jobs and livelihoods nationwide.” 

Pauline Rigby, head of corporate and insolvency specialist at Forbes Solicitors in Lancashire, said: “Concerns about tier 3 restrictions go way beyond the immediate impact on bar and restaurant owners.

"We're looking at entire supply chains which are at risk across the regions, along with the knock-on effect it has on consumer confidence.

"Companies that rely on trading with these venues also face losing significant amounts of revenue overnight and the risk of outstanding payments for goods and services already supplied going unpaid.

"They’re facing a significant ripple-effect of debt and are understandably looking to protect themselves and their employees against this.”

About the Red Flag Alert data:

At the end of March 2020, there were 3,591 bars and restaurants in Northern England in significant financial distress.

The number of Northern England bars and restaurants in significant financial distress increased to 3,754 at the end of June 2020, representing a 4.5% increase.

There are currently 16,861 bars and restaurants legally trading across the North of England - 3,754 of this total accounts for 22.3% bars and restaurants that are at serious risk of collapse if they experience disruptions to revenue and cashflow.

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