News that the Casual Dining Group is preparing to bring in administrators underscores the perilous financial tightrope that some businesses in the restaurant sector are walking right now.
Although there are clear signs that the industry is starting to spring back to life, most will agree that there is no telling what the landscape will look like come the end of the year.
What we do know is that it won’t be the same as when the crisis started.
July 4 – when Boris Johnson has indicated that the hospitality sector could reopen its doors to the public again – has given the industry a target to aim for at least.
But there is another date before that which could also prove significant: June 30.
That’s the date (for now at least) when the temporary ban on winding up petitions will be lifted.
The government introduced the measure last month to protect restaurants and other retail businesses from aggressive debt collection and closure during the pandemic.
Research from accountancy firm UHY Hacker Young shows that the number of petitions to wind up restaurants over unpaid bills has jumped to 53 so far this year.
In the grand scheme of things, that doesn’t sound a huge amount. But the fact it is up from 20 in the same period last year – an increase of 165% – begins to tell its own story.
The jump so far only takes into account the very start of the crisis, when restaurants were only just closing. The expectation is that a “surge” could follow.
Like other measures brought in to support the industry at this time, the temporary ban on the use of winding up orders against businesses that cannot pay their bills due to the coronavirus situation has provided much-needed breathing space while they have been closed.
But if the ban is lifted – and there are strong calls for it to be extended – it could spark another significant rise in winding up petitions in just a few weeks time.
Peter Kubik, partner at UHY Hacker Young’s London office, said the recent jump in winding up petitions against restaurants is “unlikely” to be the biggest increase we see this year. He fears many will struggle to stay in business when the lockdown ends and costs return to their normal levels.
As it stands, restaurants face being one of the last sectors to return to normal activity.
And one of the biggest issues for operators that haven’t been able to make any meaningful headway with things such as takeaway or delivery is that they will have a very small window to get customers back through the door before the cost of restarting begins to impact their cash.
Industry bodies and figureheads are doing everything in their power to lobby the government for as much support as they can get.
It will be a travesty if many businesses find themselves issued with court orders before they have even been given the chance to mount a fightback.