'Welcome surprise' as UK’s top restaurant groups return to profitability after four years of losses

The Top 100 restaurant companies ranked by revenue posted a combined profit of £19.9m in the last year, up from a loss of £673m a year ago. 

Reflecting a profit margin of less than 0.5% on a turnover of £5.2bn, UHY Hacker Young notes that while a welcome surprise. the slender profits could be challenged by the cost of living crisis, which is pushing up restaurants costs and denting consumer spending on leisure.

“The UK’s top restaurant chains finally posting a profit, however small, is a welcome surprise,” says Peter Kubik, partner at UHY Hacker Young.

“The industry has done a good job in trimming costs and getting back on the path to profitability but it's now facing a new challenge having to deal with increasing inflation and rising interest rates.”

The return to profits in the UK’s restaurant sector follows four years of losses and major restructuring amongst restaurant groups that had over expanded and then been hit hard by Covid.

Many of those restructuring programmes, which incurred substantial write-downs have now come to an end.

“Other restaurant groups which were barely keeping afloat have now closed their doors,” continues Kubik. 

“Despite their best efforts, some restaurants were not able to balance the books, leading to a 59% increase in restaurant insolvencies in the past year from 984 to 1,567.

“It would be wrong to assume that the restaurant sector is now out of the danger zone. The many headwinds the sector is facing means they will still face further challenges.”

Kubik adds that some of the better performing larger restaurant groups have been quick to use derivatives to cap their borrowing costs and agree longer term fixed price energy prices with energy suppliers.