One in three of the UK's Top 100 restaurant groups is now loss-making

By Georgia Bronte contact

- Last updated on GMT

One in three of the UK's Top 100 restaurant groups is now loss-making

Related tags: Minimum wage

35 of the UK’s Top 100 restaurant groups are now loss-making, according to research by accountancy group UHY Hacker Young.

Up from just 20 loss making restaurant groups last year, the new research shows an increase of 75%. The company says that a combination of higher staff costs, rising business rates and falling consumer confidence is to blame.

“Pressures on the restaurant sector have been building for years, and the last year has pushed a number of major groups to breaking point,” says Peter Kubrik, partner at UHY Hacker Young.  

 “With Brexit hanging over consumers like a dark cloud, restaurants can’t expect a bailout from a surge in discretionary spending. Consumers only have a finite amount of spending power when it comes to eating out, and the oversaturation of the market means that groups that fall foul of changing trends can very easily fail.”

Kubrik adds that national minimum wage, which has risen by 19% over the last five years, adds another burden to larger chains.

 “The Government has ratcheted up costs with a series of above-inflation rises in the minimum wage, and we are just weeks away from another 4.4% rise in April,” he says.

“That will be tough for a lot of restaurants to absorb.”

Recent restaurant closures in the casual dining market include Jamie’s Italian, started by Jamie Oliver, which has closed 12 branches as part of a Company Voluntary Arrangement (CVA) to restructure its estate, as well as Oliver’s meat-focused Barbecoa, which entered administration in mid-February.

Burger chain Byron will close 20 of its 67 branches following a period of paying reduced rent, as part of a rescue plan agreed by a CVA. Rents will be cut by 55% at 20 sites but most of them are expected to close.

Italian chain Prezzo is expected to close some of its 300 branches as part of a restructuring programme, and another casual Italian chain, Strada, closed 20 branches over the festive period.

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