64% of the UK’s top 100 restaurant companies are now making a loss
The figures - which are based on data from Companies House - come amid a turbulent time for restaurants.
Several restaurant groups have suffered heavy losses due to major restructuring programmes undertaken following the pandemic.
Additionally, many of these restaurant groups’ debt repayments, particularly to landlords, has pushed them down into losses.
The restaurant sector had expected a post-pandemic recovery in profits, but this has been put on hold by spiraling food inflation and a fall in consumer confidence caused by interest rate rises.
Labour shortages have also impacted the sector, causing restaurants to restrict covers and therefore reducing the amount of revenue they are able to generate, especially at peak times.
There is also increasing concern over an expected drop in consumer spending.
Peter Kubik, Partner at UHY Hacker Young, says that many in the restaurant sector are anxious over further falls in consumer spending as a possible recession gets closer.
“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,” he says.
The restaurant sector was facing difficulties even before the pandemic, UHY Hacker Young says. Many groups took on large amounts of debt to fuel aggressive expansion campaigns, which meant many were trading at a loss even in ‘normal’ pre-COVID conditions.
UHY Hacker Young expects restaurant groups to return to profitability in the longer term,with the restructuring programmes undertaken by many restaurant groups have reduced the size of their debts, while several major chains have closed unprofitable branches.
“The restaurant sector has been left reeling by successive economic setbacks. The pandemic, shortly followed by soaring inflation and supply chain issues hit the sector when many restaurant groups were already vulnerable,” continues Kubik.
“Promising signals for the sector are coming through, despite the current difficulties restaurant companies are facing. 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.”
