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1 in 5 Restaurant Businesses ‘At Risk of Insolvency’

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1 in 5 Restaurant Businesses ‘At Risk of Insolvency’

Written by: Keith Tully

Reviewed: Tuesday 31st October, 2017

empty restaurantAs many as one in five restaurant businesses in the UK are exhibiting signs which indicate that they could be at risk of becoming insolvent.

That’s according to the accountancy firm Moore Stephens, which has been looking into some of the key challenges being faced by restaurant operators throughout the country.

Just less than 15,000 such businesses are understood to be at risk of going under nationwide as a result of financial difficulties caused in many cases by worsening economic pressures.

A particular problem for businesses in the restaurant sector are the rising prices of food products and the decreasing value of the pound against other international currencies.

Since the result of the UK’s Brexit referendum last year, the pound has decreased in value very notably against the US dollar and the euro, with food imports generally becoming more expensive as a result.

Other factors cited by Moore Stephens as sources of pressure on the finances of British restaurants include increases in the National Minimum Wage and the realignment of business rates on commercial properties which came into effect in April this year.

Restaurant operators in London are believed to have seen the sharpest rises in business rates in recent months, with these increases adding to the financial pressures on thousands of small and medium-sized businesses across the capital.

Larger scale restaurant groups have also been impacted by many of the same pressures and have in some cases been forced to sell outlets to cut costs.

In the case of the Handmade Burger Co, a nationwide chain of gourmet burger outlets, financial difficulties led to its entry into administration in early July.

Further adding to the concerns for restaurant operators is the latest data on inflation and disposable incomes, which currently show prices rising above normal levels and the spending power of average consumers being eroded.

“The restaurant sector is one of the most competitive for a business to survive in at the best of times and current market conditions make it even tougher,” commented Jeremy Willmont from Moore Stephens.

“The increase in the number of insolvencies in the last year is indicative of how difficult the market conditions are now. Finances can be uncertain in the restaurant sector, but this is beyond the norm.”

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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