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UK restaurants are going bankrupt at a faster rate than during Covid | Hospitality industry

UK restaurants are going bankrupt at a faster rate than during the Covid crisis due to a ‘toxic mix’ of rising energy costs, staff shortages and falling bookings.

Closures in the sector have increased by 60%, with 1,567 bankruptcies in 2021-22, compared to 984 in 2020-21, according to a study by the consulting firm Mazars. The figure includes 453 in the last three months, compared to 395 in the previous quarter.

“Restaurant business bankruptcies are now happening at a much faster rate than during Covid,” said Rebecca Dacre, partner at Mazars. “It’s a very toxic mix of rising input costs, soaring financial costs and weak demand. Most restaurateurs have never seen this combination of negative factors before.

Industry lobby groups including UK Hospitality and the British Beer and Pub Association said last month that more than a third of hotel businesses could go bankrupt by the start of 2023.

While the industry has seen a rebound in business this summer after a series of enforced closures during Covid lockdowns, restaurants are now grappling with a spike in inflation, which has not only increased the cost of energy, food and drink, but has also meant that their customers have less money. spend to go out.

Barclaycard recently reported that more than half of Britons planned to cut back on essential spending, raising concerns over income over the Christmas period, when many businesses make the bulk of their profits.

Some companies are also struggling to recruit enough employees as post-Brexit migration rules prevent EU citizens from working in the UK. This contributed to a rise in wage inflation.

Mazars said the combined pressures were likely to mean a tough few months for the industry, despite the generally lucrative holiday period.

“The Christmas trading period is usually a bumper time for hospitality businesses. However, restaurants are going to be bracing for a very tough winter and many are facing a real battle to stay afloat,” Dacre said. has a certainty of further insolvencies if they don’t get much more government support, but the chances of the government turning the taps on completely are low.”

Richard Dement

The author Richard Dement