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Financial Distress in UK Restaurant Sector Up 8% in a Year

Written by: Keith Tully

Reviewed: Thursday 22nd March, 2018

More than 11,000 British restaurant businesses were exhibiting signs of ‘significant’ levels of financial distress in mid-March of this year.empty restaurant

That’s according to figures described as ‘Red Flag Alert’ data by the insolvency and business recovery specialists at Begbies Traynor.

At 11,091, the figure for the total number of restaurant businesses facing significant financial distress as of recent days was up 8 per cent compared to the same point in time one year ago.

Subdued consumer activity and an overreliance on promotional activities are both cited as live issues within the sector and key reasons why so many restaurant businesses are struggling to sustain healthy cash flows.

The people behind the figures have suggested that making commercial rent payments that fall due towards the end of March will be a significant struggle for thousands of restaurant owners throughout the country.

Some of the UK’s best-known restaurant chains, including the likes of Prezzo, Jamie’s Italian and Byron, have all been forced to find new ways of cutting costs and restructuring their operations in recent weeks and financial pressures in the sector continue to intensify.

According to Begbies Traynor’s Red Flag Alert numbers, those pressures are pushing more and more restaurant operators into the red as far as their finances are concerned and for some the issues could soon be too serious to overcome.

“As rising inflation continues to hit real wages, UK consumers are proving increasingly cautious when it comes to their discretionary spending, meaning that there is even more pressure on restaurants to put on margin squeezing meal deals to entice diners through their doors,” explains Julie Palmer, a partner with Begbies Traynor.

“Unfortunately for those restaurateurs experiencing both declining sales and rising costs, the upcoming quarterly rents payment this weekend could be too big a financial hit for many to swallow.”

Ms Palmer also explained that restaurant businesses are facing cost pressures linked to rising labour costs and particularly the rollout of the National Living Wage.

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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