Upcoming Quarter Day to raise the red flag for restaurants

By Georgia Bronte contact

- Last updated on GMT

Upcoming Quarter Day to raise the red flag for restaurants
Financial health monitor Begbies Traynor’s Red Flag Alert has found an increase in the number of restaurants in significant financial distress over the past year.

According to new analysis of the restaurant industry, the number of UK restaurants experiencing ‘significant’ financial distress ahead of the sector’s Quarterly Rent Day hit 11,091 on 13 March 2018, which marks an increase of 8% year on year.

Restaurants described by Begbies Traynor as being in ‘Significant’ financial distress are those with minor County Court Judgements (of less than £5000) filed against them or which have been identified as being at risk by Red Flag’s proprietary credit scoring system.

The monitor’s data shows consumer spending to have dropped over the 18 months to December 2018.

Subdued customer confidence and lower discretionary spending compounded with overdependence on promotional offers to drive footfall means some restaurant owners may be unable to afford the commercial rent payments due on 25 March.

A “perfect storm” of challenges have resulted in a number of high profile company voluntary agreements across the industry, including Jamie’s Italian, Byron and Prezzo.

“As rising inflation continues to hit real wages, UK consumers are proving increasingly cautious when it comes to their discretionary spending, meaning that there is even more pressure on restaurants to put on margin squeezing meal deals to entice diners through their doors,”says Julie Palmer, partner at Begbies Traynor.

“Unfortunately for those restaurateurs experiencing both declining sales and rising costs, the upcoming quarterly rents payment this weekend could be too big a financial hit for many to swallow.”

Red Flag Alert has been measuring and reporting corporate financial distress since 2004. It uses an algorithm to measure signals of corporate distress, including intelligence from its insolvency business.

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