A study conducted by accountancy firm UHY Hacker Young has revealed that over 1,410 restaurants collapsed in the UK last year.
The impact was due to an “over-saturated mid-market” due to “rapid growth of the causal-dining sector”.
According to the study, the number of restaurants that went insolvent during the 2018-19 period increased by 25% to over 1,410, compared to 1,130 during 2017-18. The number is the highest registered in the industry since 2014, which was 749.
Concerns about Brexit and rising costs due to the collapse in the value of the pound were major factors.
UHY Hacker Young London Turnaround and Recovery partner Peter Kubik said: “The crisis in the restaurant sector has been presented as a problem only for the chains that had lost touch with their customers.
“That’s overlooking the hundreds of small independent restaurants that have become insolvent.
“Good restaurants and bad have all struggled from over-capacity, weak consumer spending and surging costs. Having a loyal following is great but if that loyal following stops going out then you have a problem.
“The number of restaurants whose sales are at or near capacity is pretty small – they’re the exception.”
The study also noted that only restaurants with “strong brand loyalty and a differentiated offering” will be able to survive the insolvencies.
In addition, the study identified that the top 100 restaurants in the UK reported an £82m loss last year.
Kubik added: “Those businesses that had the foresight to scale back operations before the going got really tough are in better shape now.
“For those businesses that are suffering distress, aggressive management of cashflow, will be key in the coming months. For example, renegotiating payment terms with creditors and cutting unnecessary expenditure.
“Unfortunately, the sector can’t really expect banks to be as generous with their lending especially as the sector’s current problems are so well known.”
