Record two thirds of UK's top restaurant groups are making a loss, study warns

Debt repayments, staff shortages and spiralling inflation have pushed almost two thirds of the UK's top 100 restaurant companies into the red, new research claims.

Several restaurant groups suffered heavy losses due to major restructuring programmes undertaken following the coronavirus pandemic, according to accountancy group UHY Hacker Young.

It said debt repayments, particularly to landlords for rent accrued during the past two years, has pushed many groups to a loss.

The restaurant sector had expected a post-pandemic recovery in profits, but this has been hampered by spiralling inflation impacting food costs and energy bills. Staffing shortages and energy bills have also caused some sites to restrict covers and cut opening hours to cope.

Peter Kubik, partner at UHY Hacker Young said the restaurant sector was fearful of a further drop in consumer spending after the Bank of England last week warned the country was facing a recession.

He added: "It may be a case of ‘out of the frying pan, into the fire' for many UK restaurant groups. They expected, and needed, higher consumer spending as we put COVID further behind us, but this spending is now likely to fall when it is needed most."

The restaurant sector was facing difficulties before the pandemic and many groups took on large amounts of debt to fuel aggressive expansion plans, meaning many were trading at a loss in pre-lockdown conditions, UHY Hacker Young said.

However, Kubik said there are signs things could improve for the sector.

"Promising signals for the sector are coming through, despite the current difficulties restaurant companies are facing," said Kubik.

"The success of restructuring campaigns being undertaken, unprofitable branches closing, and debts shed through CVAs brings hope for a sunnier future for the restaurant sector."

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