Restaurant closures hit ten-year high

06 July 2023 by
Restaurant closures hit ten-year high

Restaurants closed at their highest rate in a decade in the first three months of the year, at an average rate of five per day.

According to new figures from accountancy firm Price Bailey, 569 restaurant businesses filed for insolvency, bringing the total to 2,028 closures over the last 12 months. This represents a 55% increase on 2021, when 1,303 restaurants, an average of 3.1 per day, were forced to close.

Kate Nicholls, UKHospitality chief executive, said: "These figures show an alarming increase in restaurant closures and clearly demonstrate the challenges faced by hospitality businesses big and small, all across the UK.

"Our members are reporting energy costs up 80 per cent year-on-year, food price inflation for hospitality up 22 per cent and, on top of this, rising interest rates are compounding the pressure on those businesses that have had to take out loans in order to survive."

Alongside Nicholl's warnings of energy price hikes and high food inflation, Price Bailey has also warned that the rate of closures is only to get worse.

It cited reasons including the cost-of-living crisis which is leading to consumers cutting back on eating out, but pointed to the cumulative effect of interest rate rises, with more potentially to come, that is pushing indebted restaurant businesses into insolvency.

The report noted rising interest rates increasingly leave highly leveraged businesses in the restaurant sector unable to meet loan repayments. At the same time, banks are clamping down harder on non-performing loans and shifting, instead their focus to those with growth prospects.

However, despite the rise in restaurant closures, separate data from the Office for National Statistics commissioned by Price Bailey reveals optimism among restaurant owners is rising.

A third of British restaurants are reporting turnover is rising, rather than falling, marking an improvement on six months ago when just 16% were reporting rising turnover compared to 37% who said it was on the decline.

Matt Howard, head of the insolvency and recovery team at Price Bailey, said, while there are early signs of an improvement in trading conditions for restaurants, the improving economic outlook "may come too late" for many restaurant businesses.

He added: "There is often a lag between a return to more robust economic activity and declining insolvencies. Banks will likely start to put increasing pressure on debtors to perform or pay off loans. Focus will start to shift from financially stressed businesses to startups and those with better prospects, which may mean that insolvencies continue to rise despite many restaurants seeing improved takings."

It comes after news that Le Pain Quotidien has closed all but one of its UK sites and entered administration with the loss of 250 jobs, and Prezzo is to close almost a third of its restaurants after its restructuring plan was approved by the High Court.

Continue reading

You need to create an account to read this article. It's free and only requires a few basic details.

Already subscribed?

The Caterer Breakfast Briefing Email

Start the working day with The Caterer’s free breakfast briefing email

Sign Up and manage your preferences below

Check mark icon
Thank you

You have successfully signed up for the Caterer Breakfast Briefing Email and will hear from us soon!

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.

close

Ad Blocker detected

We have noticed you are using an adblocker and – although we support freedom of choice – we would like to ask you to enable ads on our site. They are an important revenue source which supports free access of our website's content, especially during the COVID-19 crisis.

trade tracker pixel tracking