Why is hospitality the highest-risk sector for credit?

Hospitality has the highest insolvency rate of any UK sector. Reasons: razor-thin margins (typically 3% to 10% net), high fixed costs (rent, staff, utilities), seasonal revenue fluctuations, perishable stock, dependency on consumer spending, and high staff turnover. A restaurant doing £1M turnover may net only £30K to £100K profit. One bad quarter wipes out a year of profit.

What types of hospitality businesses should I credit check?

All of them: restaurants, cafes, pubs, bars, nightclubs, hotels, B&Bs, event venues, catering companies, food trucks, and managed food-service operations. The risk profile varies: independent restaurants are highest risk, managed pub chains are lower risk (backed by the parent company), and hotel chains are generally more stable. Check the actual trading entity, not the brand name.

What are the warning signs in hospitality companies?

Key signals: accounts overdue (the first sign of cash pressure), director taking minimal or no salary (cash going to service debt instead), high staff turnover (visible on HMRC RTI data), multiple changes of leaseholder or management company at the same premises, increasing food cost percentage (squeezing margins), and rent reviews pushing occupancy costs above 10% of revenue.

How much credit should I extend to a hospitality business?

Conservative approach: never more than one week of their typical order value without receiving payment for the previous week delivery. For a restaurant ordering £2,000/week of produce, maximum exposure should be £2,000 to £4,000. Never let arrears exceed 2 weeks of supply. If payment slips to 3 weeks outstanding, stop delivering immediately.

Should I supply hospitality businesses on credit at all?

Many food and drink wholesalers have no choice (the industry expects 7 to 14-day terms). Mitigate risk by: checking every new account before first delivery, setting tight credit limits, monitoring payment patterns weekly (not monthly), stopping supply the moment payment extends beyond terms, and using retention of title clauses in your terms.

What happens if a restaurant or pub owes me money and closes?

Most hospitality insolvencies are CVLs (creditors voluntary liquidation). Submit your proof of debt immediately. Recovery is typically 0 to 5p in the £1 because: premises are leased (no property to sell), fixtures and fittings have minimal resale value, perishable stock is worthless, and the bank usually has a debenture over all other assets. Prevention (credit checks and monitoring) is the only effective strategy.

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Hospitality Risk

Hospitality Credit Check: The Highest-Risk Sector

Hospitality has the highest insolvency rate in the UK. Thin margins, high fixed costs, perishable stock, and seasonal demand. Check every restaurant, hotel, and pub before you extend credit.

Georg Eiermann / Unsplash

Check a hospitality business

Enter the company name or number. See financial health, director history, filing status, CCJs, and insolvency risk. Know before you deliver.

Why hospitality fails

The typical hospitality P&L:

Food/drink cost28% to 35%

Staff cost28% to 35%

Rent and rates8% to 15%

Utilities and overheads8% to 12%

Net profit3% to 10%

A 5% revenue decline (one quiet week) can turn a profitable restaurant into a loss-making one. Two bad months in a row often triggers insolvency.

Warning signs in hospitality

Payment slowing from 7 days to 14 to 21. In hospitality, payment terms are short (7 to 14 days). If a restaurant that used to pay at 7 days is now at 21, they are using your goods as working capital. Stop delivering.

Ordering cheaper lines. Restaurant that used to order premium produce suddenly switches to budget ranges. Margin is being squeezed. They are trying to cut food cost to compensate for falling revenue.

Chef or manager changes. Head chef leaves and is not replaced. General manager resigns. Key staff leaving a hospitality business is often the first visible sign (they see the cash-flow pressure before suppliers do).

Accounts overdue at Companies House. If a restaurant company has not filed accounts, it is either too busy surviving to deal with admin, or the accounts show losses they do not want creditors to see. Either way, a warning sign.

A British street lined with stone buildings — George Ciobra / Unsplash

Who supplies hospitality on credit

Food and drink wholesalers

Fresh produce, meat, fish, dry goods, beverages. Typically 7 to 14-day terms. High delivery frequency (2 to 5 times per week). Exposure builds fast. A restaurant going dark mid-week can leave you with 2 weeks of unpaid deliveries.

Brewery and drinks suppliers

Tied pubs buy from their brewery, but free houses buy on credit from multiple suppliers. A pub ordering 10 barrels/week on 14-day terms builds £3K to £5K exposure quickly. Cellar stock has resale value, but is often consumed before insolvency.

Laundry and linen services

Hotels and restaurants use commercial laundry on weekly billing. Individual invoices are small (£200 to £500/week) but arrears of 2 to 3 months create £2K to £6K exposure. Often the last supplier to be paid (low priority for the operator).

Equipment and fit-out suppliers

Commercial kitchens, EPOS systems, furniture. Large one-off purchases on 30 to 60-day terms. A new restaurant orders £40K of kitchen equipment. If it closes within 6 months (common), the supplier is owed the full amount.

A £29 check is cheaper than a £5K bad debt.

Quick Check (£29) analyses the hospitality business across 72 signals from 12 UK data sources: financial health, director track record, filing compliance, CCJs, and insolvency risk. Know whether this restaurant or hotel can pay before you start delivering.

Check a hospitality business Monitor your customer ledger (£19.99/mo)

Monitor hospitality customers weekly

Hospitality businesses deteriorate fast. A pub that is healthy in January can be insolvent by March. RecoupIQ monitoring (from £19.99/mo) alerts you within 24 hours of any distress signal: late filing, CCJ, gazette notice, director resignation. Stop delivering before the insolvency notice arrives. Available via the web dashboard or the Microsoft 365 Trust Check app. RecoupIQ is a Microsoft partner.

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Last reviewed: July 2026. General information for UK businesses. Not financial advice. RecoupIQ Ltd, Company No. 16947526, ICO ZC077511. Microsoft Partner.