Restaurants and pubs need ‘specific assistance’ to avert insolvencies

Restaurant and pub insolvencies 2014-2019, UHY Hacker Young

The government’s coronavirus rescue package must prioritise channelling funds to smaller restaurant and pub businesses as the industry was already stuck in a slump before the crisis struck, a leading business advisory has warned.

Research from UHY Hacker Young shows that 1,452 UK restaurant businesses and 526 pub businesses went insolvent in 2019, an increase of 10% year-on-year in each category.

The requirement for all restaurants and pubs in the UK to close immediately has led to fears the insolvency figure will be significantly higher over the next 12 months.

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Peter Kubik, partner in the company’s London office, said: “There are few sectors that are going to be more heavily impacted than pubs and small restaurants.

“Most other businesses can shift their staff to home working or sell through the internet. Clearly that is not possible for pubs. For those restaurants that decide to carry on selling takeaway food they face the problem of having to give delivery companies a very large percentage of their remaining income.

“Both the pub and restaurant industry feel they need more specific assistance from the government.”

While the government has launched an emergency loan scheme, it is to be channelled to small businesses through lenders which are already accredited.

Mr Kubik said this arrangement could cut off many smaller pub and restaurant companies, who traditionally have to borrow from second tier lenders who are not on the list of accredited lenders.

He commented: “Small restaurant and pub companies are also going to worry that banks will prefer to lend to the biggest and best capitalised companies in their category, who are in less need of emergency loans.”

“The government has already done a lot by suspending business rates and VAT payments and offering wage subsidies to help ease the burden on businesses. However, their next step should be ensuring the health of the long list of businesses that banks still won’t lend to even under the new scheme.”

High-profile restaurant chains in other countries have already fallen into insolvency due to the coronavirus, suggesting some UK restaurants could face a similar fate, Mr Kubik added.

“German-based restaurant chains Vapiano and Maredo both fell into insolvency in March 2020,” he said.

Tags : InsolvenciesresearchUHY Hacker Young
Andrew Seymour

The author Andrew Seymour

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