A fifth of UK restaurants at risk of going under

By Stefan Chomka

- Last updated on GMT

A fifth of UK restaurants at risk of going under

Related tags National living wage Bankruptcy Insolvency

Up to a fifth of UK restaurants are at risk of going bust due to Brexit, according to new research by accountancy firm Moore Stephens.

Its research has found that 20% of restaurants, amounting to some 14,800 sites, are threatened with closure as rising staff costs and the fall out of Brexit put a strain on the sector.

The number of restaurants declaring insolvency has risen by 13% in the year ending March 2017, according to the company, which says that the Government’s decision to increase the National Living Wage (NLW) to £7.50 for workers aged 25 and over in April has added pressure on restaurants struggling to turn a profit. Plans to increase the NLW even further in the near future, aiming to reach at least £9 by 2020, coupled with the rising cost of produce, will exacerbate the problems.

“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,” says Jeremy Willmont, head of restructuring and insolvency at Moore Stephens.
“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.”

Even large restaurant groups have been hit by rising costs, with Byron, Prezzo and Jamie’s Italian all closing restaurants in the past year​ because of tough trading conditions. Handmade Burger Co went into administration earlier this year​, further highlighting the problems facing the sector.

Figures released by the ONS in October show real household disposable income has fallen 1.1% in the past year. This is a further sign of worry for restaurateurs, who now have to navigate the prospect of falling demand for eating out, says Moore Stephens.

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