The number of UK restaurant insolvencies in the past year has risen 64 percent on the previous 12 months, as the expected long aftershock of the COVID-19 pandemic combines with price rises from Brexit and Russia’s invasion of Ukraine.
1,406 restaurants closed, in comparison to 856, with 431 of those closures coming in the last three months, according to research by accountancy firm UHY Hacker Young. The rise has steepened since March 2022, when government protections against back rent owed to landlords expired. While any debts accrued in the “protected period” — which for England was 20 March 2020 to 21 June 2021 — were ring-fenced and must be referred to an arbitrator by both landlord and tenant, landlords were no longer barred from taking action on unpaid rent from outside of that period.
Those repayments, as well as repayments for business loans taken out at the height of the pandemic, were factored into restaurants’ calculations for some time — forming part of their outgoings as soon as they were able to reopen fully. VAT also returned to 20 percent from 5 percent (via a period at 12.5 percent) in April 2022. Restaurants had prepared for these increased costs. They knew they were coming.
They didn’t know the soaring energy and ingredient prices were coming — the former a particular problem because, unlike households, there is no price cap on commercial energy bills. And it’s not just that prices have risen — whether for ingredients, energy, or less obvious things like cooking oil. Inflation hitting 9 percent in April of this year has also depressed customer spending, demolishing a predicted £12 billion increase in hospitality revenues whose figures were calculated before Russa invaded Ukraine, putting huge pressure on oil and gas prices and secondarily driving up the costs of other products.
More soon on how these financial crises are affecting London restaurants.