Chartered Accountants in the UK revealed their findings of research carried out on restaurant businesses who entered insolvency proceedings in the last year. Results showed the following:
- 1,410 restaurants in the UK entered insolvency in 2018/19
- the number of insolvent restaurants rose by 25 per cent when compared with 2017/2018 (1,130 cases)
- the UK’s Top 100 restaurants made an £82 million loss in the last year, down from a pre-tax profit of £102 million twelve months ago
Why are more UK restaurants entering insolvency?
The steep rise in restaurant insolvencies can partly be attributed to the ‘over-saturated’ casual-dining sector created since the last recession. This, coupled with ‘the Brexit related blow to consumer spending and a rise in raw material costs’, has precipitated the sector’s crisis.
Lower footfall, a shortening of disposable income, as well has landlords high rents and business rates. All these factors play a large part upon insolvencies for any restaurant in the UK.
Ultimately the latest figures indicate that the restaurant industry in the UK is going through a ‘dramatic shake-out’, according to the accountants.
Smaller restaurant businesses are suffering too
While much of the focus on restaurants going out of business has been on big name, multi-chain restaurants such as Jamie’s Italian, Byron Burger, Pizza Express and Strada’s dining outlets, problems have also been seen at thousands of smaller restaurant businesses, according to the Turnaround and Recovery Insolvency firm.
“The crisis in the restaurant sector has been presented as a problem only for the chains that had lost touch with their customers. That’s overlooking the hundreds of small independent restaurants that have become insolvent.”
How restaurants can survive the difficult climate
To make it through the turbulent climate, management of cashflow is the key piece of advice offered by the insolvency firm. They suggest renegotiating payment terms with creditors and cutting unnecessary expenditure but also warn that businesses may not be able to easily secure bank loans with the sector’s struggles so well publicised.
If your restaurant is under pressure and are worried about the insolvency process on your business. Please feel free to contact us to work out a rescue plan.