Restaurant Insolvencies Increased by 20 Percent in the UK Last Year

A total of 984 restaurants across the UK fell into administration in 2017, a report from the Government’s Insolvency Service says. It marks a 20 percent increase on the 825 that met the same fate the previous year. The numbers reflect a challenging time especially for chain restaurant brands, with closures at Jamie’s Italian, Strada, Byron and Prezzo, but also notable independents, all indicating how higher business rates, the London living wage (and staff costs), increased competition, a weaker pound and rise in food prices have adversely affected the sector.

The restaurant businesses which qualified as insolvent in the analysis were those who were unable to pay debts owed, thereby entering liquidation; or adminstration; or those who were forced to accept rescue plans (such as the Company Voluntary Agreements applying to Byron and Jamie’s Italian).

In an analysis, Jeremy Willmont, restructuring and insolvency partner at firm Moore Stephens wrote:

“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.

“Restaurants have been particularly impacted by rising costs linked to the weak pound, and will continue to face difficult decisions over how much of their increased costs they try to pass on to consumers.

“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.

“A restaurant’s fortune can change remarkably quickly as consumers look for the next new and exciting opening. A restaurant not completely on top of market trends is going to struggle in this environment.”

Given the rate and nature of restaurant closures in London so far this year, it is thought that the year 2017 to 2018 will be as bad, if not worse, for the industry.