Restaurant insolvencies in the UK reach ‘epidemic’ levels

Restaurant insolvencies 2010-2018

The number of restaurants going insolvent has breached 1,000 in a year for the first time since the figures were first tracked in 2010, it has been revealed.

Following a turbulent year in which many of the top high street also names reduced their store portfolios, some 1,219 restaurants went bust in 2018.

That represents a rise of 24% on the 985 operators that closed last year, according to figures from accountancy firm Moore Stephens.

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Moore Stephens said the jump in insolvencies reflects the restaurant industry’s grapples with overcapacity, with an influx of private equity investment into restaurant businesses leading to some chains opening too many sites that are failing to break even.

It noted that some restaurant chains are going through the Company Voluntary Arrangements (CVA) process to close many of their unprofitable branches, citing Gourmet Burger Kitchen’s decision to implement a CVA in October that is set to see 17 restaurants close.

Moore Stephens added that recent interest rate rises and concerns over Brexit have put a dent in the growth of consumer spending, with consumers eating out less.

Prescott & Conran’s Albion restaurant in Farringdon, London, shut suddenly earlier this year owing to financial troubles.

Annual growth in household spending slowed to 1.6% in the second quarter of 2018, down from 3% in the same period in 2017.

Jeremy Willmont, head of restructuring and insolvency at Moore Stephens, said: “Closures in the restaurant sector are at epidemic levels now. The impact is visible on almost every high street of a major town or city.

“Restaurants have always been prone to high failure rates but vacant restaurants used to be rapidly replaced by a new contender. For now, that process seemed to have stalled and many sites are empty. In the wake of Brexit uncertainty and interest rate rises, it seems consumers are tightening their belts and discretionary spending is the first thing to go.

“Under such tough trading conditions, restaurants should be cautious about building up debt. They can very quickly become overextended as costs continue to rise.”

Moore Stephens adds that slowing consumer spending comes on top of a number of other financial pressures.

Restaurants with tighter profit margins, in particular, could still be struggling to cope with employment costs such as rising minimum wages and the apprenticeship levy as well as increased food and beverage caused by a weak pound.


Tags : InsolvenciesMoore StephensresearchRestaurants
Andrew Seymour

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