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Insolvencies Among Restaurants Up 64% in a Year



Written by: Jonathan Munnery

Corporate insolvency rates among restaurant businesses increased by as much as 64 per cent in the year to May 2022, according to a new set of figures.

The data reveals the extent of the financial struggles that restaurant operators have been grappling with in recent months, particularly with inflation rising so quickly since the start of the year.

In addition to inflationary pressures, however, restaurant businesses have also been finding it tough to recruit people as readily as they would want and consumers have generally been cutting back on their spending in recent months too.

Among the consequences has been a very considerable increase in restaurants needing to close their doors to customers and cease trading.

According to figures compiled by the accountancy firm UHY Hacker Young, there were 1,406 restaurants that closed their doors across the UK during the 12 months to May, which represents a 64 per cent increase on the previous year.

Those numbers suggest that 2021/22 was a particularly testing time for restaurants even as compared to the wider hospitality sector, which saw insolvency rates increase by 54 per cent on the same comparative basis.

Restaurant businesses including well-known high street chains suffered significantly during the worst months of the Covid pandemic and the nationwide lockdowns that the situation made necessary.

For a huge number of hospitality enterprises, surviving the pandemic was extremely difficult financially but major challenges have remained despite a return to more normal operating practices.

“Pressure is rising on the restaurant sector every day,” said Peter Kubik, a partner with UHY Hacker Young.

“Restaurants that only just managed to survive the pandemic thanks to government support are now facing fresh challenges in the form of rising inflation, a post-Brexit labour shortage and consumers who simply cannot afford to spend as much.”

The industry trade body UKHospitality has repeatedly called on the government to do more to support pubs and restaurants through targeted policy measures and by addressing issues relating to business rates in particular.

UKHospitality recently described most of its members as “carrying a heavy debt” and “facing soaring costs”.

The organisation also recently reported that only one in three hospitality businesses in the UK can accurately be described as profitable operations.

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