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Restaurant insolvency numbers creep up as cash flow pressures bite

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Restaurants face choosing between absorbing rising costs or making redundancies in order to survive, a leading accountancy firm has warned.  

UHY Hacker Young claims a wave of insolvencies “is waiting to happen” after the number of UK restaurants going bust increased 31% to 296 in the last quarter, up from 226 the previous quarter.

It said many restaurants have faced a cash flow crisis which may have tipped some over the edge into insolvency.

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After being closed for much of last year, restaurants are having to suddenly increase their expenditure, but their sales have not recovered quickly enough.

These costs include bringing staff off furlough, restocking inventory, refurbishing the premises and repaying CBILS/BBLS loans.

At the end of September, both the furlough scheme and a ban on winding-up petitions came to an end. This ban prevented creditors from taking legal action against companies that owe them money.

UHY Hacker Young believes “many more” insolvencies are likely to happen as more creditors begin to pursue debts more robustly.

Peter Kubik, partner at UHY Hacker Young, said: “Restaurants have been hit with a cash flow crisis and this is partly due to the end of the furlough scheme. Unfortunately, fears that the end of Covid support schemes would lead to a rise in insolvencies are quickly becoming a reality.”

“With wages no longer being covered by the furlough scheme, this leaves restaurants with a tough decision to make – either bear those extra costs themselves or make redundancies.”

“The restaurant sector is still trying to get back up on its feet, whilst dealing with the huge burden of costs such as CBILS and BBLS repayments. There’s a risk a wave of insolvencies is waiting to happen if they don’t receive further support from the government.”

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Tags : researchRestaurantsUHY Hacker Young
Andrew Seymour

The author Andrew Seymour

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