Linklaters study shows restaurant groups such as Prezzo have resorted to CVAs to close outlets. Credit: Betty Longbottom.

Data analysis by global law firm Linklaters has shown that the number of restaurants in financial distress increased by 143% in the last six months.

The study also found that restaurants filed 12 CVAs during the first quarter of this year, compared to 17 CVAs filed last year.

Restaurant groups such as Byron, Carluccio’s and Prezzo have resorted to CVAs to close outlets this year.

“Owners are looking at where they can reduce costs to put the business on a more sustainable footing.”

Linklaters restructuring and insolvency partner Richard Hodgson said: “The sector has been faced with a number of issues that have caused a stranglehold.

“First, there’s oversaturation in the market. A number of chains expanded rapidly to the point that supply has raced ahead of demand. Couple that with increased food prices, staff costs and business rates, owners are looking at where they can reduce costs to put the business on a more sustainable footing.”

The research also states that the CVAs assisted businesses to recover affected property companies.

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Linklaters real estate partner Simon Price said: “When used successfully, CVAs can lead to businesses being saved and therefore fewer property vacancies.

“However, their use has become much more wide-spread and is therefore having a more significant impact on landlords than was maybe originally conceived. As a result, we have seen some resistance and pressure from a number of landlords this year, calling for the government to reform the system.”