Restaurant insolvencies jump by a fifth to highest levels since pandemic

By BigHospitality

- Last updated on GMT

Restaurant insolvencies jump by a fifth to highest levels since pandemic

Related tags: Insolvency, Finance, Landlord, UHY Hacker Young

Restaurant insolvencies jumped by a fifth in the last quarter of 2021 to reach highest levels since the Coronavirus pandemic began.

The number of restaurant insolvencies rose to 354 in period, up from 296 in the third quarter of the year, according to national accountancy group UHY Hacker Young.

Despite the end of Coronavirus restrictions, the sector faces considerable challenges with the invasion of Ukraine and resulting sanctions on Russia already causing a sharp spike in oil and gas prices.

With Russia and Ukraine both major exporters of crops, such as wheat and corn, food prices are likely to increase dramatically, says UHY Hacker Young

Restaurants will also have to contend with the upcoming hike in National Insurance rates, which means employers will be forced to pay an extra 1.25% per employee, per month from 6 April.

Rising interest rates will make borrowing more expensive for restaurants, as well as increasing the amount they need to pay back on existing loans. Given the huge number of restaurants that took on extra debt during the pandemic, this is likely to be substantial, it predicts.

The forthcoming Commercial Rents Bill, which is due to come into effect on 25 March, will put further strain on restaurants. Under the bill, commercial landlords can take action against tenants that have fallen into rent arrears during lockdown with restaurants potentially being forced to pay rent for the periods in which they were unable to open.

“The restaurant sector has emerged from one crisis only to face an onslaught of other challenges,” says Peter Kubik, partner at UHY Hacker Young.

“Covid restrictions may have ended but higher loan repayments, National Insurance increases and potentially lower demand as the cost of living crisis starts to bite could see an even greater number insolvencies within the sector.”

“Restaurants could at least rely on Government support during the worst of the pandemic.  Now that these protections have come to an end, they’re having to face multiple challenges with zero help.”

“Given the enormous pressures the restaurant sector is under, the Government should seriously consider scrapping or at the very least postponing, the Health and Social Care tax.”

In addition to increasing overheads, UHY Hacker Young says there are also concerns that the rising cost of living will leave consumers with less money in their pockets to spend on eating out and socialising.

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