New figures published by the firm reveal that the Top 100 restaurants made a loss of £82m in the last year, down from a pre-tax profit of £102m twelve months ago.
Of the UK’s Top 100 restaurant groups, 48 are now in the red, up from 37 last year.
The huge loss in profits has been caused by a number of restaurant chains going through radical restructuring in order to shut loss-making branches, says UHY Hacker Young.
Those restructuring costs have incurred ‘dramatic’ short-term cash costs such as funding staff redundancies, exiting tenancy agreements and terminating contracts with suppliers.
Examples of restaurants currently facing financial difficulties include Italian chain Prezzo, which announced last year that it will close 93 of its restaurants and cut 1,000 jobs; and Italian restaurant group Carluccio's, which closed 35 restaurants, close to a third of its estate, under a Company Voluntary Arrangement (CVA) last year.
Last week Jamie Oliver’s UK restaurant group entered administration, leading to the closure of 22 restaurants and the loss of 1,000 jobs.
UHY Hacker Young says that closures are being forced on the sector after it went through a period of rapid expansion that far outpaced the growth in consumer spending on eating out.
The sector has also been hit by higher staffing costs and a fall in Sterling that has pushed up input costs.
“Restaurant groups are having to undergo radical restructuring surgery just to stay afloat,” says Peter Kubik, partner at UHY Hacker Young.
“Cutting down the number of branch chains is financially stressful for restaurant companies but in the long term it is essential they get to the right size.”
Despite the gloom, Kubik points out that there are still reasons for the sector to remain optimistic, citing the bumper sales recorded by South African restaurant chain Nando’s last year, and the successful sale of Wagamama to the Restaurant Group for £559m.