Casual dining a 'high risk sector' as cost of living crisis bites

In its latest Societal Impact Report The Institute for Turnaround (IFT) predicts increased demand for its services among struggling casual dining businesses this year ‘as the cost-of-living crisis tightens its grip on consumers’.

“Among IFT practitioners, casual dining is expected to see continuing demand for turnaround management over the next 12 months, in part reflecting consumers squeezed by rising energy bills, higher food prices and increased mortgage costs,” says IFT Chairman Andy Leeser.

“This was backed up by data from Companies House that showed that the same sector saw steep increases in the number of distressed companies in the last quarter of 2023.”

The IFT report states that inflationary pressures, rising energy prices, interest rates and labour shortages mean demand for turnaround expertise among distressed businesses more generally will continue to grow in 2023.

“The directors behind UK businesses large and small, having risen to the manifold challenges of the Covid pandemic and associated lockdowns, might have expected a period of calm to recover and rebuild. Instead, firms have found themselves faced with multiple new challenges,” adds Leeser.

“A cost-of-living crisis is hitting consumers, whilst a cost of doing business crisis is combining with pre – existing stresses to put a great deal of pressure on UK PLC.”

While inflation is predicted to continue to fall, the IFT says it still expects 2023 to end well above the Bank of England’s two percent inflation target. Borrowing costs and borrowing conditions will most likely remain challenging, it says, with rising prices and wage pressures remaining big headwinds for business in 2023.

‘All these factors are still working their way through to the balance sheets of UK businesses, with much of the consequences still to be felt,’ it says.

A challenging 2023 ahead

In a survey of IFT members for the report, 89% said that 2022 had been as busy or busier than 2021. When looking at the next 18 to 24 months, 93% percent of members predicted this period will be even busier still.

The first quarter of 2023 is set to see the biggest spike in demand for turnaround expertise, with 81% of respondents regarding increased insolvencies as the biggest challenge, ahead of rising inflation (73%).

In terms of the biggest challenges affecting distressed businesses over the next six months, inflationary pressures came top with 81% of respondents seeing this as the biggest hurdle facing UK businesses, ahead of energy prices (61%) and labour supply issues (41%).

Regionally, the south east and London were home to the largest number of struggling companies in the third quarter of 2022, according to data provided by FRP analysis of a range of company data across the UK.