Restaurant closures higher in 2014 than in height of recession

During the 2014/15 financial year 1,294 restaurants became insolvent, compared to 865 in 2009/10. 

Moore Stephens' restructuring and insolvency partner Steve Ramsbottom said the figures may come as a surprise with consumer spend growing.

However, he said the influx of new restaurant concepts was leading to more competition in the industry and coupled with issues such as rising rents the pressure on restaurant businesses was now 'extremely high.'

“Whilst consumer spending on eating out is increasing, the competition for that restaurant spend is intensifying at a faster rate. Innovation in the sector is leaving some older formats for dead," he said. 

“At the same time costs – particularly rents - are rising. The combination of these factors is creating very challenging market conditions and increasing numbers are closing as a result."

Inexperienced and unadventurous​

Ramsbottom said many first-time restaurateurs underestimate the costs associated with setting up a restaurant business and the impact of on-going overheads on profits.   

“The buzz surrounding innovative new food and restaurant concepts may be a big draw encouraging people to ‘have a go’ but the inexperienced can get out of their depth very quickly," he said.  

“That’s true for pop ups and mobile street food businesses as well as restaurants. Installing equipment in a converted warehouse or serving lobster rolls out of a vintage fire engine doesn’t come cheap." 

On the other hand, Ramsbottom said long-standing restaurateurs unwilling to change with the times were being 'edged out' by companies with new concepts.  

“As new, trendy eateries open up in towns and cities, existing restaurants and food outlets which may seem less exciting and inviting by comparison are inevitably at risk of getting edged out," he said. 

Competition for sites, a shortage of staff and the expansion of private equity-backed chain restaurants were also noted as major reasons for failure in the restaurant sector last year according to Moore Stephens.